Latvian central bank governor, and therefore a Governing Council member of the European Central Bank, Martin Kazaks said policy is now in a “good place,” with rates on hold and inflation at target. He argued another cut isn’t needed, as growth risks from tariffs and Chinese imports are balanced by signs of manufacturing recovery and cooling wages.
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European Central Bank Governing Council member Martins Kazaks said the ECB has entered a phase where policymakers can stand back and observe the economy, rather than needing to steer it more aggressively. With inflation at the 2% target and no major changes since June’s projections, he argued there’s no need for further immediate rate cuts.
The ECB ended its year-long easing cycle in July after eight reductions, leaving the deposit rate at 2%. Officials have since signalled they are likely to hold again in September. Kazaks noted that while tariffs of 15% on EU exports to the U.S. will drag on growth and cheap Chinese goods pose risks, business surveys show signs of a manufacturing recovery and wages are slowing as expected — supporting confidence that inflation will remain at target.
He added that inflation will likely undershoot early next year before rebounding, consistent with ECB forecasts that see it dipping to 1.6% in 2026 before returning to 2% in 2027. Traders’ expectations for no further cuts this year align with this outlook. Kazaks downplayed the impact of an additional 25bp cut, saying it would be more symbolic “insurance” than a meaningful policy shift.
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Earlier:
- Reuters cite five sources as saying the ECB may begin cutting rates again later in 2025
- European Central Bank next meet on September 11
This article was written by Eamonn Sheridan at investinglive.com.