ECB Insight: From One of the Council’s Quietest Members, a Possible Shift in Tone

22 July 2024

By David Barwick – FRANKFURT (Econostream) – Though we wouldn’t want to overstate the importance of a single set of comments from one of the quieter members of the European Central Bank’s Governing Council, we note with interest a possible shift in the attitude of Peter Kažimír.

In his traditional post-Council meeting statement issued on the website of the National Bank of Slovakia, which he heads, Kažimír on Monday noted financial market bets on another two ECB rate cuts by the end of 2024.

‘While this isn’t entirely misplaced, it should not be taken as a given or a baseline scenario’, he said.

His apparent willingness now to envision the possibility of another two steps by year-end contrasts with a clear reluctance to countenance such a scenario on 27 June. His message then was: ‘I think we could expect one more interest rate cut this year.’

At that time, he explained his relatively conservative expectations by citing ‘a significant risk of rising inflation, which may not fully align with our expectations.’

In his comments today, Kažimír packaged this warning in less urgent terms reminiscent of those in his 10 June commentary, speaking merely of a ‘non-negligible risk of inflationary pressures re-emerging’.

A relatively rare public speaker in comparison to his peers, Kažimír has nonetheless managed to establish himself as unambiguously on the hawkish side. Econostream’s hawk-dove ranking situates him at the same level of hawkishness as Latvijas Banka Governor Mārtiņš Kazāks and Banka Slovenije Governor Boštjan Vasle.

This makes the apparent shift in Kažimír’s thinking all the more interesting, as he has historically seemed noticeably more inclined to feed hawkish market expectations.

For example, as early as January he said that a first rate cut in June was ‘more probable’ than that easing would start in April, and accused financial markets of having ‘got ahead of events since December.’

Without wishing to make too much of it, it is this tendency not to mince words when it comes to sounding hawkish that makes us sit up and take notice of Kažimír’s apparent acceptance of the possibility of two more cuts by the end of the year.