ECB’s Kažimír: October Move Was an Insurance Cut, Not a Declaration of Victory

21 October 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Peter Kažimír said on Monday that the most recent interest rate cut should not be seen as a sign of triumph over inflation.

In a blog post published on the website of the National Bank of Slovakia, which he heads, Kažimír said that the decision to cut rates in the October meeting was not a ‘foregone conclusion’ for him.

‘In the end, I joined consensus. … that was the right thing to do. It’s an insurance cut and confidence boost, not a declaration of victory’, he said.

Although there were arguments for the move, he would have been willing to keep rates unchanged, he said.

‘We have had little new information since our September gathering’, he said, ‘but the batch of data we had was shifting the balance of risks on inflation to the downside.’

The decision in December was now totally open and there was full optionality, he said.

‘If new data and forecasts confirm an accelerated pace in disinflation, we will be in a strong and comfortable position to continue the easing cycle’, he explained.

A downturn in wages and services inflation should become more apparent to win the fight against inflation, according to Kažimír.

Geopolitical developments could bring upside risks for inflation, he said.

‘If new information points in the direction of higher inflation (risks), we can still slow down the pace at which we remove restrictions in the coming meetings’, he added.

Despite being more optimistic about disinflation, the head of the National Bank of Slovakia said he needed more evidence to ensure that the inflation target would be reached in a sustainable way.

‘It’s better to be safe than sorry, and this move ensures we are well prepared for what lies ahead’, he concluded.