European Central Bank Governing Council member Kazaks: Inflation risks still exist, discussing interest rate cuts is "premature".

European Central Bank Governing Council member Martins Kazaks said on Thursday that it is still too early to discuss another interest rate cut, given that inflation in the eurozone may still be higher than expected. In the first half of this year, as the inflation rate fell to the target level of 2%, the European Central Bank cut its policy rate in half, but has since kept rates unchanged - even though forecasts show inflation easing slightly and the economy showing moderate growth. As the next ECB meeting on December 18 approaches, Kazaks pointed out that now is not the appropriate time to lower borrowing costs, as core inflation remains well above 2% and inflation faces two-way risks. The Latvian central bank governor emphasized in an interview, "Based on the current data, I believe that it is not yet the right time to discuss an interest rate cut." At the upcoming meeting, ECB interest rate decision-makers will receive inflation forecasts for the next three years. Kazaks stressed that the inflation data for 2026 and 2027 are more relevant than the preliminary forecast for 2028. He explained, "Of course, we need to look at the latest forecasts first, but I will focus on 2026 and 2027 - monetary policy transmission usually takes one to two years, and the three-year forecast has a large margin of error, especially in the current environment of uncertainty." According to the ECB's latest forecast released in September, inflation is expected to be 1.7% in 2026 and rise to 1.9% in 2027. Kazaks acknowledged that the potential delay in the implementation of the EU Emissions Trading System ETS2 may "dampen" inflation, but he also emphasized that decision-makers still need to "continue monitoring the core inflation indicator, which remains consistently above 2%." He pointed out that downside risks such as adjustments to the ETS2 policy, increased influx of Chinese goods into the European market, and a potential appreciation of the euro "are becoming clearer," but upside risks such as trade fragmentation should not be ignored.