ECB’s Kazimir dismisses rate cut expectations; urges patience on policy decisions

ECB Governing Council member Peter Kazimir dismissed speculations of impending rate cuts in the early months of 2024. Speaking earlier today, he stated emphatically, “Bets on rate cuts happening already in the first half of next year are entirely misplaced.” Instead, he alluded to a persistent approach, suggesting that “We will have to stay at the peak for the next few quarters.”

Addressing the growing sentiment that the current policy cycle is nearing its end, Kazimir urged caution. “All those voices coining this as the end of the cycle should hold their horses,” he remarked. “It’s too soon to declare victory and say the job’s done.”

While not entirely closing the door on further adjustments, Kazimir implied that any future policy decisions would be data-driven. “Additional tightening could come, if incoming data force us to take such a step,” he explained.

The unfolding situation in the Middle East remains a concern, especially given its potential implications on inflation. Kazimir shared, “I will eagerly await the December update of our inflation forecast to get a clearer picture, confirmation, that the decline in inflation is sustained. I hope that renewed upside inflation risks from the escalating tragic conflict in the Middle East will not materialize.”

Furthermore, Kazimir highlighted the significance of upcoming milestones before any definitive policy stance is taken. “December forecasts are one of two key milestones needed to pass. March is the latter. By then, it should have become clearer how wage negotiations for the whole year turned out and whether the risks of a spiral of high prices and high wages were off the table,” he added.