ECBs Kazaks from interview: Too soon to cut rates

ECBs Kazaks in an interview published today but given on February 23rd:

  • Acknowledges disinflationary processes and effective monetary policy transmission, suggesting optimism yet caution. Kazaks noted, “we are in a relatively good situation.”
  • Stresses that the journey towards stable inflation is not complete, emphasizing ongoing vigilance. He remarked, “But can we already say that we are done? No, not yet.”
  • Highlights the necessity of observing various elements to prevent an inflation rebound, with policy decisions remaining data-dependent. “Policymakers still had to observe the evolution of various elements.”
  • Discusses the upcoming March Governing Council meeting and the potential for rate cuts, underscoring flexibility in approach. “Rate cuts could come sooner and be smaller or come later and be bigger.”
  • Advises against premature rate cuts, drawing lessons from past experiences to avoid necessitating future hikes. Kazaks warned, “it would be a very bad outcome if we moved too early and were then forced to hike interest rates again.”
  • Suggests patience in policy adjustment, with a focus on upcoming labor market data and other indicators. “It’s a matter of meetings, which is a question of months or quarters.”
  • Emphasizes a data-driven approach to policy decisions, ensuring readiness to act swiftly if required. “I have a hard time imagining us being massively late; we are reading the same data that the market is reading.”
  • Calls for patience and a careful evaluation before initiating rate cuts, to avoid premature loosening of policy. “Let’s make sure that the problem is really resolved before we start cutting rates.”

This article was written by Greg Michalowski at Source