European Central Banks rate cut next week is a certainty? Executive committee Kazimira: may cut interest rates two to three more times in the future

Recently, Peter Kazimir, a member of the European Central Bank's governing council and the governor of the Slovak central bank, stated that an interest rate cut by the European Central Bank next week is almost certain, and there may be two to three more rate cuts in the future. In an interview on Monday evening, he indicated that recent data suggests that the ECB should continue with consecutive rate cuts of 25 basis points each. However, given the increased uncertainty, the ECB must maintain flexibility to adjust policies in a timely manner according to changing circumstances. Kazimir, the governor of the Slovak central bank, noted that consecutive rate cuts of three to four times are feasible, but not guaranteed. He emphasized that for him personally, an agreement has already been reached regarding the rate cut decision next week. In fact, most of Kazimir's colleagues at the European Central Bank also signaled similar intentions before the ECB's first policy meeting in 2025, and economists and traders generally agree with this move. However, debates continue to escalate about how quickly and by how much borrowing costs should be further reduced. On one hand, some are concerned that a weaker euro may increase inflation risks, while others worry that overly tight policy stance may lead to excessive deflation. Kazimir stated, "What we need most is to strike a balance between being overly cautious and overly aggressive." He pointed out that although the ECB's work is not yet done, it is on the "right track" to restore inflation to the target of 2%. While it is expected that wage growth will further slow down, suppressing price pressures in the service sector, Kazimir stressed, "We need definitive evidence that this channel is effective, and this will take some time." Furthermore, Kazimir believes that geopolitical risks bring additional challenges. He specifically mentioned the price pressures that may arise from the economic policies of US President Donald Trump. The ECB expects that the inflation rate in the eurozone will reach 2% in the coming months, fluctuating around that level at least until around 2027. Officials, including Kazimir, believe that the slight increase in inflation rates in December will not change this outlook, nor will it be surprising. Kazimir further stated, "The latest data shows that we will continue to maintain our current production cut policy. I see no reason to pause the cuts, or to discuss different magnitudes of cuts." He pointed out that the current cut magnitude can maintain economic growth momentum while preserving some flexibility, especially in the absence of signs of reduced uncertainty, which is crucial. At the same time, Trump's threats to close the US border and impose tariffs globally may push up domestic inflation in the US, forcing the Fed to maintain high interest rates. As a result, the US dollar has recently strengthened in anticipation, sparking speculations about the impact of ECB policy. Kazimir stated that the current intent of the ECB governing council is to remove all constraints on the economy without stimulating demand. He believes that the neutral level of interest rates should be between 2% and 3%, possibly closer to 2% than 3%. He emphasized, "We rely on data, not the Federal Reserve." ECB officials often reiterate this point. He also mentioned that the ECB is monitoring exchange rates, as they may influence inflation through import prices, but conclusions should not be drawn based on short-term developments. Kazimir also mentioned that the negative economic consequences of Trump's policies are more concerning than the potential inflation impact, especially considering Europe's already "very slow potential growth." He stated, "Europe's structural problems are more severe and painful, and with Trump's economic policies, Europe's competitiveness issues will become more prominent."