ECB Insight: From Dovish to Doubtful – Kazāks Clouds September Outlook Further

25 July 2025

By David Barwick – FRANKFURT (Econostream) – In our 6 June interview, European Central Bank Governing Council member Mārtiņš Kazāks appeared to envisage not just one, but at least two more rate cuts. His comments today make clear that this is no longer the case, and strongly support scepticism that there will be further easing seven weeks from now.

As a reminder, in the interview on the heels of the 5 June rate cut, Kazāks considered it ‘quite likely’ that ensuring 2% inflation would require ‘some further cuts for fine tuning’.

That view persisted into the ECB’s annual Sintra conference at the start of July, though already in a more tentative form. There, Kazāks floated the idea of a small 'insurance cut', but qualified this with the caveat that it was 'too early to say' given the prevailing uncertainty.

In the interview with Bloomberg published today, there was nothing left of Kazāks’ earlier tentative embrace of further easing. On the contrary, his emphasis was squarely on maintaining the current stance, as he declared that there was ‘no urgent need to move rates’ and saw ‘value in holding rates at the current levels’.

The apparent shift in attitude came with clear reasons, as he pointed to ‘still a lot of monetary easing to work through the economy.’ Not only that, but – echoes of Econostream’s interview with ECB Executive Board member Isabel Schnabel – the economy, he found, had ‘some untapped growth potential’.

We find this comment, flanked by his suggestion that an end to the trade dispute could lay the groundwork for economic upturn, significant. It harks back to Schnabel from before Thursday’s press conference and to ECB President Christine Lagarde’s articulation yesterday of the Council’s view.

Lagarde, as we highlighted following her appearance, indicated that the ECB had turned more optimistic with regard to economic prospects. She did so in understated fashion, of course, but the fact that Kazāks is picking up that thread is important. Stronger-than-expected growth would be a first-class reason for the ECB to do less.

Though moderately hawkish during the hiking cycle, Kazāks quickly warmed to lower borrowing costs and was relatively vocal about the need for these, earning him over the course of last year successive re-rankings on the Econostream hawk-dove scale.

At the moment, he is rated ‘slightly dovish’, which may even understate the case. In any case, it makes his apparent change of tune now all the more telling, and suggests a potential for some other governors who had turned dovish amid eight ECB rate cuts to now ‘revert’, leaving a few die-hard doves without the more broad-based support they had until now.

His comments today certainly strengthen our doubts about a September cut. Yesterday, we said the July pause was ‘slightly’ more likely than not to extend to 11 September. After today’s comments, we would now remove the word ‘slightly’.