ECB’s Kažimír: ‘More Aggressive Monetary Easing Would Require a Dramatic Shift in Conditions’
16 December 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Peter Kažimír on Monday said that more aggressive policy easing by the ECB would only be possible if circumstances changed dramatically.
In a blog post published on the website of the National Bank of Slovakia, which he heads, Kažimír said that ‘[t]he relief offered by the continued slowing of inflation is overshadowed by a lacklustre economic recovery and an ongoing investment malaise.’
The ECB still had ‘considerable room to cover’, for which ‘a gradual, step-by-step approach through 25bp rate cuts continues to be the most prudent strategy’, he said.
The benefit of this approach was that while it would support the economy, the ECB would simultaneously retain room to manoeuvre, he said.
‘Incoming cuts must be approached with caution and flexibility, as the economic horizon is anything but predictable’, he said. ‘A more aggressive monetary easing would require a dramatic shift in conditions to justify it.’
Being more aggressive could exert a short-term impact, but at the cost of overextending the ECB without dealing with the original source of European economic anaemia, which was chiefly structural, he said.
‘Lower interest rates can provide breathing space, but they cannot replace the vital reforms, innovation, and investments that are so urgently needed’, he said. ‘Policymakers must act swiftly and decisively.’
No matter how low interest rates, they would not save Europe in the absence of structural reform, he said.
‘Flexibility and data dependence will remain the cornerstones of our approach’, he said. ‘When necessary, we will act decisively. However, we must resist the temptation to overreact to short-term pressures.’
‘The easing of inflation is a welcome development, but it is not the final chapter’, he added.