Martiš Kazaks, Governor of the Bank of Latvia and member of the European Central Bank’s Board of Governors, on Thursday considered the possibility of a deep 0.5 percentage point cut in interest rates in December.
Asked for his views on the ECB’s decision to cut interest rates by 50 basis points at its next meeting, he said: “Everything should be on the table.”
“But we will have that discussion in December,” he told CNBC’s Karen Tso at the IMF’s annual meeting in Washington, D.C., on Thursday.
“We will have discussions early next year and, as I said, we will discuss it from meeting to meeting and we will get closer to the 2% (inflation) target,” said the normally dovish view. The central bank governor added:
His comments came after the ECB decided at its October meeting to cut interest rates consecutively for the first time in 13 years. This comes a day after Portuguese central bank governor Mario Centeno made similar comments.
“The truth is that inflation was very low in September, much lower than we expected,” Centeno, a known dovish ECB board member, told CNBC on Wednesday. Dovs tend to favor low interest rates to encourage economic growth, while hawks are more concerned about inflation and its impact on society.
“We need to factor that into our story,” Centeno said of recent inflation rates. “Then we have to look at the data that’s coming in and the trends in the data that we’ve seen so far, but we continue to rely on data and the data that we’re getting is in that direction, so certainly 50 Basis points may be a consideration.” ”
The ECB’s move earlier this month, the third quarter-point rate cut this year, was fully priced in by markets as decision-makers pointed to lower inflation risks and weaker growth prospects.
Kazak stressed that the bank “remains in a fairly restricted space.”
“So easing the pressure from interest rates is of course what we need to do and this is what we will do. But of course, as you know, we need to look at the data,” he added. Ta.
Eurozone inflation was recently revised to 1.7% in September, down from the previous official forecast of 1.8%. This compares to 2.2% in August.
September was the first month in which the inflation rate in the euro area fell below the ECB’s 2% target since June 2021, marking an end to years of excessive price increases and increasing expectations for further interest rate cuts in the short term. Ta.