ECB’s Kazāks: Next Move Could Be an ‘Insurance Cut’ To Ensure Inflation Returns to 2%

1 July 2025

ECB’s Kazāks: Next Move Could Be an ‘Insurance Cut’ To Ensure Inflation Returns to 2%
Mārtiņš Kazāks, governor of Latvijas Banka, at the Latvijas FinTech Forum 2024 on November 5, 2024. Photo by the Latvijas Banka under CC BY-ND 2.0.

By Marta Vilar – SINTRA, Portugal (Econostream) – European Central Bank Governing Council member Mārtiņš Kazāks said on Tuesday that if the ECB were to change interest rates again, it could deliver an ‘insurance cut’ to avoid the inflation undershoot in 2026 from becoming persistent. 

In an interview with Bloomberg on the margins of the ECB Forum on Central Banking 2025 in Sintra, Kazāks, who heads the Latvijas Banka, said that ‘[i]f rates would move, they might go down rather than up.’ 

However, he made clear that any move would not be big as the economy was growing and inflation was close to 2%. 

It’s more about signalling and fine-tuning. It could also be an insurance cut, to ensure that inflation moves back to 2% after falling short in early 2026’, he said. But it’s too early to say given the uncertainty.’ 

Should the euro appreciate further versus the US dollar, inflation and exports would decrease further and that could tip the balance towards another interest rate reduction, he said. 

 

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