European Central Bank Governing Council Member Kazaks: There is currently no need for further interest rate cuts
European Central Bank Governing Council member Kazaks stated that there is currently no need for further interest rate cuts, as the inflation rate has reached the 2% target and the economic outlook has not changed significantly. He pointed out that the European Central Bank has entered a new phase of monetary policy, where officials will focus on economic monitoring rather than intervention. Although trade agreements have reduced uncertainty, the 15% tariffs still weigh on economic growth, but signs of recovery in manufacturing and slowing wage growth have strengthened confidence in medium-term inflation stability. Kazaks believes that the market's understanding of the central bank's policy is consistent with the baseline and does not expect an interest rate cut at next month's meeting
According to the Zhitong Finance APP, Martins Kazaks, a member of the European Central Bank's Governing Council, stated that the European Central Bank has entered a new phase of monetary policy, allowing officials to focus on monitoring the economy rather than actively intervening to change its direction. Speaking at the Federal Reserve's annual symposium in Jackson Hole, Wyoming, Kazaks noted that with inflation at the target level of 2% and recent data not indicating significant changes since the June quarterly forecast, there is currently no need for further interest rate cuts.
After lowering the deposit rate to 2% eight times, European Central Bank policymakers paused further monetary easing in July. Since then, many decision-makers have indicated a preference to remain on hold at next month's meeting.
Kazaks stated, "We see good news and bad news, but these are not enough to prompt us to reconsider the actions we need to take. I believe our current situation is still good."
Although the trade agreement between the EU and the US has reduced some uncertainties hindering business investment, the 15% tariffs on most export products will still weigh on economic growth.
However, related surveys indicate that European manufacturing is recovering, a sector that has struggled to expand for over three years. Wage growth has also slowed as expected, bolstering confidence that medium-term inflation will stabilize at 2%.
Kazaks remarked, "We have reached our target, the job is done—now we need to ensure we can stay within the target range. We know that by early next year, inflation will be slightly below the target, but of course, the question is how it will start to rebound."
The European Central Bank predicted in June that inflation would fall to 1.6% by 2026 and then rise back to 2% the following year. New forecasts will be released in September, which will be crucial for policymakers' interest rate decisions.
Traders expect that the European Central Bank will not cut rates again this year, and Kazaks stated that traders' views are "very consistent with the baseline."
He said, "The market understands us."
He believes that one reason the European Central Bank may not cut rates next month is that another rate cut would not significantly change the outlook for Europe.
Kazaks stated, "A 25 basis point cut would not have a major impact on the economy. To me, it feels more like an insurance measure."
Currently, it seems that another rate cut is not a necessary move. European Central Bank Governing Council member Olli Rehn also indicated that there is no need for the European Central Bank to act before economic growth and inflation risks materialize. He stated, "Any 'rate cut' merely for the sake of insurance is unnecessary."
Kazaks emphasized that most of the risks pointed out by officials in June still exist.
He said, "At least for now, I don't think we are in a hurry to catch up." But he also noted, "We still rely on data. If we believe action is necessary, then we will take action."
