ECBs Kazaks says
- The European Central Bank (ECB) has a “clear-cut” case for cutting interest rates at its next meeting, as the euro zone’s economy nears a tipping point
- Investors have already priced in a rate cut for the ECB’s October 17 meeting, driven by lower-than-expected inflation and growth data, and messaging from ECB officials like President Christine Lagarde.
- Kazaks, Latvia’s central bank governor, noted that economic recovery is still weak in parts of the eurozone, with wage growth moderating and profit margins shrinking.
- Kazaks agrees that the decision to cut rates in October is clear and suggests that key risks need to be addressed.
- After battling high inflation for two years, the ECB cut rates in June and September, with inflation nearing the 2% target (1.8% in September).
- Growth is also weak, particularly in the manufacturing sector in Germany.
- Kazaks warned that euro zone companies could begin shedding workers, creating a snowball effect that could further slow growth.
- Despite a potential 25-basis-point cut, Kazaks noted that the ECB’s rate on deposits, at 3.25%, would still dampen economic activity and help control inflation in the services sector.
- Kazaks indicated no immediate need for a larger rate cut, as the ECB has time to make further moves if necessary.
Explicit call for AHA cut from ECB’s Kazak.
This article was written by Greg Michalowski at www.forexlive.com.
