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.