European Central Bank (ECB) Governing Council member Martins Kazaks said inflation hovering slightly below 2% is acceptable, stressing that the central bank should avoid knee-jerk policy moves. The Latvian central bank chief argued it would be unrealistic to expect inflation to always land exactly at target, and rates should only shift if there’s a clear need.
Kazaks said the ECB has already achieved its goal with inflation near 2%, so there’s no reason to rush into more cuts after the eight already delivered. While October is unlikely for a move, he noted December could bring more clarity as fresh economic projections arrive. He added that, if warranted, a small rate cut could be used to reinforce the ECB’s baseline scenario, similar to the final hike in 2023.
He also flagged risks such as a stronger euro, cheaper imports from China, and the new emissions trading system, which could all sway inflation. Overall, he expects price growth to fluctuate around 2% and says minor deviations should not prompt policy shifts.
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Kazaks was speaking at a European finance chiefs meeting in Copenhagen. From the same event over the weekend:
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ECB patience limits downside pressure on the euro from further rate cuts; but is appears the door is open for a small December cut. The signaling of rate stability should, at the margin, trim near-term policy volatility for European stocks.
