ECB’s Kazaks Says Interest Rates Can Be Cut at Next Meeting

(Bloomberg) -- The European Central Bank can lower borrowing costs at this month’s meeting, according to Governing Council member Martins Kazaks.

“Next week we have the ECB’s council meeting, and to to my mind — looking at the data that we have at available at the moment — we can take the next step in the direction of decreasing rates,” the hawkish Latvian central-bank chief told Latvian TV on Wednesday. “Of course there will be a discussion, as there always is, but for me at this moment this picture is pretty clear.”

The ECB is gearing up for a second rate cut following June’s initial reduction. The case for another move has been bolstered by inflation plunging to its lowest level since mid-2021, though some policymakers have stressed that the battle to tame prices isn’t over yet.

Investors are betting on two or three more decreases in borrowing costs this year — plus additional steps in 2025. As the deposit rate - currently 3.75% — nears the 3% mark, discussions among officials are likely to get tougher, according to people familiar with the matter.

Kazaks flagged elevated increases in services costs — driven by rising wages — as a reason to remain cautious, and only ease monetary policy gradually. But he said pay growth is moderating.

“Rates have to go lower because the biggest part of the inflation problem has been solved,” Kazaks said. “The discussion is only about how quickly and how strongly.”