In an interview after the publication of the latest statistical data, which shows that inflation in the Eurozone fell to the lowest level in 27 months in October, Kazak stated that a sharp drop in economic activity or an increase in unemployment might be necessary to consider such a decision. “There is no need to discuss rate cuts,” Kazak said.
The reduction of borrowing costs in the first half of 2024, “in my opinion, would contradict the current macroeconomic forecasts, but the uncertainty is, of course, still great”, said the President of the Bank of Latvia.
Kazak is among the members of the ECB council who stress that talk of cutting interest rates is premature.
“Eurostat” data published on Tuesday, October 31, show that inflation in the eurozone decreased to 2.9% in October, while economic growth in the eurozone slowed down to 0.1% in the third quarter. Investors are now predicting that interest rates could be cut in June, not July, as was predicted a week ago, writes “Bloomberg”.
But Kazak believes that the battle against the fastest rise in consumer prices in the euro era has not yet been won, and the road ahead is likely to be difficult. “Yes, we are seeing a sharp fall in inflation, but it is still well above [ECB noteiktā mērķa] 2%,” Kazak said.
“Of course, there are still risks that inflation may take root at a higher level than has been experienced before, but not at the 2% level,” added the President of the Bank of Latvia.
He also indicated that there is still the possibility of raising interest rates again if a further rise in inflation is observed.
It has already been reported that on October 26, the ECB Council decided to keep interest rates unchanged for the first time since July 2022.
At the meeting of the ECB Council in Athens, it was decided to maintain the main refinancing operations rate at 4.5%, the overnight deposit rate at 4% and the overnight lending rate at 4.75%.
Until now, the ECB Council had raised interest rates ten meetings in a row.
2023-11-01 13:58:13
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