European Central Bank policymaker Martins Kazaks said it was too early to consider a new interest rate cut, even as overall eurozone inflation edged closer to its 2% target. He stressed that inflation could potentially be higher than expected and warned that current conditions did not support discussions on further easing at its December 18 meeting.
The ECB had previously cut its key rate by half in the year to June, in line with inflation falling to its 2% target. However, the central bank has opted to keep rates on hold since then despite the latest projections showing slightly lower inflation and moderate economic growth, reflecting caution about risks in both directions.
Kazaks stressed that core inflation remains well above 2%, making it too early to judge price pressures as truly contained. He said policy decisions would depend on the new set of inflation projections that policymakers receive at their next meeting.
The ECB’s September forecast showed inflation expected to be 1.7% in 2026 and 1.9% in 2027, slightly below the 2% target. However, Kazaks warned that longer-term projections, especially three years ahead, have a large margin of error given the current environment of uncertainty. They should therefore be interpreted with caution.
He acknowledged that factors such as the postponement of the EU’s ETS2 emissions trading system, Chinese goods dumping and the potential strengthening of the euro could dampen inflation, but stressed that upside risks, including a disruption in global trade, were also significant. In this regard, Kazaks stressed the need to continue monitoring core inflation and not rush to ease policy until the risk picture became clearer.
