(Bloomberg) -- European Central Bank Governing Council member Peter Kazimir offered the only real resistance so far to a third cut of the year in interest rates next week — despite that outcome looking more and more assured.
“It’s considered a done deal in the media that rates should be lowered,” Kazimir told reporters in Bratislava. “But I have to say I’m not completely convinced that we should make decisions based on one good number,” he said, referring to September’s dip in inflation to below the 2% target for the first time since 2021.
His fellow hawks, however, have been more accommodating toward further monetary easing. Bundesbank President Joachim Nagel said Tuesday that he’s willing to consider the idea. Executive Board member Isabel Schnabel has acknowledged growing economic weakness, without pushing back against another reduction in the deposit rate.
In an interview with L’Echo published Wednesday, Belgium’s Pierre Wunsch didn’t rule out a move, though did say that he’d like to see more analysis first and cautioned against loosening too rapidly as Middle Eastern tensions boost energy prices.
Momentum has been building for acting in October since business surveys indicated a deterioration in the region’s economic prospects and inflation cooled more quickly than anticipated. Markets see a more than 90% chance of a quarter-point rate cut to 3.25% on Oct. 17, and see another coming in December — the final meeting of 2024.
Speaking earlier Wednesday — the final day before a week-long quiet period preceding ECB policy meeting — France’s Francois Villeroy de Galhau reiterated that a reduction is “very probable,” and won’t be the last. Latvia’s Martins Kazaks and Christodoulos Patsalides of Cyprus both voiced readiness for a cut, while Greece’s Yannis Stournaras told the FT that he sees two more steps by year-end.
Kazimir was less certain.
“I can’t rule out that we might go for a rate cut next week,” the Slovak central-bank head said. But “it’s crucial to make decisions based on the overall summary of information. And we’ll have that key information in December.”
That leaves him as the only public voice seriously questioning the likely outcome of the ECB’s upcoming meeting, with even arch hawk Robert Holzmann of Austria steering clear of the topic.
What Bloomberg Economics Says...
“Our view is that the ECB will lower borrowing costs by 25 basis points in October and again in December. After that we see quarterly moves as policymakers feel their way to neutral.”
—David Powell, senior euro-area economist. Click here for full INSIGHT
October’s policy decision comes just five weeks after the last rate cut in September, resulting in fewer data points to judge the state of the economy. In addition, the meeting doesn’t include new forecasts to guide policymakers.
The ECB has already said it expects inflation to tick up again in coming months, though several officials — including Portugal’s Mario Centeno — have warned that there’s also a danger of undershooting the 2% goal. Kazimir is less worried on that score.
“I definitely don’t wake up in a sweat thinking that the inflation rate should be well below 2%,” he said. “On the contrary, we still lack sufficient confidence that we’re out of the woods and that the goal of sustainably being at 2% is entirely realistic.”
--With assistance from William Horobin, Aaron Eglitis, Georgios Georgiou, Eleni Chrepa and Sotiris Nikas.
(Updates with Belgian governor in fourth paragraph.)
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