Kazimir Advocates Flexibility on ECB Rate Cuts Amid Inflation Risks
FRANKFURT (Reuters) - There are still plenty of upside risks to euro zone inflation, so the European Central Bank must remain open-minded on whether to press ahead with interest rate cuts or pause them, Slovak central bank Governor Peter Kazimir said on Monday.
The ECB cut rates for the sixth time since June on Thursday but raised the prospect of a pause, given exceptional uncertainty over U.S. tariffs, increased defence spending and volatile energy prices.
"Inflation risks remain tilted to the upside," Kazimir said in a blog post. "History taught us that tariffs slow growth and boost inflation — precisely what we aim to avoid."
This complexity means the ECB needs to be flexible and not commit to a decision without hard evidence in data.
"This flexibility means staying open-minded and keeping all options open, whether we decide to cut again or pause," Kazimir added.
The ECB had previously predicted inflation would reach its 2% target just after mid-2025 but last week it revised its forecasts, seeing it back at target only in the first quarter of 2026.
"I am still looking for undeniable confirmation that disinflation will stay," Kazimir added. "Now is not the time for automatic decisions or rushing."
Investors have priced out one full rate cut in the past week and now see about 40 basis points of moves over the rest of the year, meaning one or two more steps are expected.
Markets see a pause in April as a more likely outcome but a cut in June, when the ECB publishes new economic projections, is fully priced in.
(Reporting by Balazs Koranyi; Editing by Hugh Lawson)
