ECB’s Kazāks: ‘Very Much Open for a Discussion of Yet Another Rate Cut in September’

23 August 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said late Thursday that he was very willing to consider further easing of ECB monetary policy at the Council meeting on 12 September.

In an interview with Bloomberg at Jackson Hole, Kazāks, who heads Latvijas Banka, declined to say how many more ECB rate cuts this year would be appropriate.

‘We’ll, see, we'll see’, he said. ‘But what I would say, of course, we have had so far relatively mixed bag of data, but it's still within the confines of the baseline scenario that we have. And given the data that we have at the moment, I would be very much open for a discussion of yet another rate cut in September.’

Still, he observed, important data had yet to come.

‘We still need to see the new forecast’, he said. ‘We still need to see all this data, but for inflation. But overall, I would say even if inflation over the next few months keeps moving sideways, it is consistent with further rate cuts.’

While unwilling to pinpoint the neutral rate, he left no doubt that the current policy stance was still well removed from this.

‘Currently, we're still relatively restrictive and with … at least a couple of more rate cuts … we would still remain … in the restrictive territory’, he said. ‘I think from the current perspective on a gradual and kind of step by step approach to rate cuts would be the best.’

A risk of resurgent inflation remained, he said, noting high services inflation.

‘But this is consistent with the baseline scenario that we have’, he said. ‘And I would say that we are still solidly on the path to 2% during 2025. I would not like to see, however, this to be pushed into ‘26.’

He continued: ‘Inflationary expectations being anchored and stable have been very much helpful and I don't think that we should risk by not attaining 2% in a sustainable way quite soon and then risking us being hit by some other shocks and then pushing inflation away from the target. I don't think that would be appropriate. So 2%, gradually, step by step during ‘25 would be a nice thing to do.’