ECB hawkish committee member Kazimir stated: A rate cut in September requires "a significant economic change"
European Central Bank Governing Council member Peter Kazimir stated that there is no rush to cut interest rates in September unless there is a significant economic turnaround. He pointed out that current economic data is insufficient to support a rate cut, and that the expectation of inflation being below 2% in the coming year is temporary. Kazimir emphasized that trade agreements help alleviate uncertainty, but the impact on prices still needs to be observed. He believes that inflation will not persistently remain below the 2% target and that there may be upward risks in the future
According to the Zhitong Finance APP, Peter Kazimir, a member of the European Central Bank's Governing Council and the Governor of the Slovak Central Bank, stated on Monday that the European Central Bank is not in a hurry to lower borrowing costs again unless there is a significant unexpected economic turnaround; otherwise, there is not enough reason to take action in September.
Last week, the European Central Bank kept interest rates unchanged as widely expected by the market and provided a slightly optimistic assessment of the Eurozone economy, prompting investors to lower their bets on further easing policies.
In a blog post, Kazimir stated, "Based on the latest data, I do not expect any significant situation that would force me to take immediate action in September. I will not support taking action unless there are signs of a clear collapse in the labor market."
This view is consistent with statements from sources within the European Central Bank, indicating that the threshold for a rate cut in September has been significantly raised after halving the rate to 2% since June 2024.
The trade agreement reached between the EU and the US last Sunday is clearly a positive signal, as it reduces the uncertainty faced by businesses, but its impact on prices, which is a core concern for the European Central Bank, remains unclear.
Kazimir stated, "(This trade agreement) helps alleviate concerns and rebuild confidence. We now have a clearer understanding of the situation, but it will take time to observe how much this new environment will affect inflation."
In response to key debates among policymakers, this outspoken hawkish official clearly expressed that he believes the current inflation rate will not fall below the European Central Bank's 2% target as it did in the decade before the pandemic.
Forecasts indicate that price increases will fall below 2% next year and will not rebound until 2027. This has raised concerns among some central bank governors: once inflation is significantly below 2%, inflation expectations may also decline, potentially leading to persistently weak price growth.
Kazimir stated, "I do not see a potential threat of inflation remaining persistently below the target. The expectation is that any situation of inflation being below the target in the coming year should be temporary." He added that trade turbulence also poses upside risks to inflation, especially in the context of bottlenecks caused by the restructuring of global supply chains
