Member of the Executive Board of the European Central Bank, Martins Kazaks, expressed a very open attitude towards another interest rate cut by the European Central Bank in September at the Jackson Hole Symposium. He expressed confidence in inflation returning to 2% and also signaled economic weakness. He pointed out that gradually reducing borrowing costs is desirable and the next ECB meeting will be held in three weeks.
According to Caixin, European Central Bank Governing Council member Martins Kazaks recently stated that he is preparing to discuss another interest rate cut at the meeting next month. Kazaks expressed confidence in the inflation rate returning to 2% and also conveyed his concerns about the economic situation.
During the Jackson Hole Symposium on Thursday (August 22nd), the hawkish official and Governor of the Bank of Latvia expressed a very open attitude towards discussing another interest rate cut in September based on the data currently available to us.
On Thursday, a key indicator of eurozone wage inflation was released, showing a slowdown in the growth of collective agreement wages in the second quarter, boosting hopes that the inflation rate will return to 2% by 2025.
Kazaks also expressed confidence in the decline of inflation and pointed out, 'We still need to see new forecasts, we still need to see the inflation data for August. Overall, even if inflation continues to consolidate in the coming months, it will be consistent with further interest rate cuts.'
Will there be an interest rate cut in September?
Following the first interest rate cut in June, investors generally expect the European Central Bank to cut interest rates again in September, especially as the region's economy shows signs of weakness.
On Thursday, the S&P Global Services Purchasing Managers' Index for August showed that the German economy unexpectedly accelerated its decline. The situation in the entire eurozone is also very gloomy, regardless of the impact of the Paris Olympics.
Regarding the economic situation in the euro area, Kazaks said, "Monetary policy has done well in suppressing inflation, creating a basis for growth, and reducing uncertainty. But the lack of structural improvement means that overall growth is relatively weak."
At the Jackson Hole Symposium, Kazaks and other members of the European Central Bank's Governing Council hinted at the desirability of lowering borrowing costs. Kazaks said, "From the current perspective, a gradual reduction in interest rates would be best."
He also added that even if the deposit interest rate is lowered "several times" in the short term, the monetary policy will remain tight. The current deposit interest rate of the European Central Bank is 3.75%.
European Central Bank Governing Council member and Governor of the Bank of Finland, Olli Rehn, also pointed out that the risks to European growth prospects are increasing day by day, which strengthens the reasons for policy adjustments at next month's central bank meeting.
Three weeks later, the European Central Bank will hold a new monetary policy meeting, at which the meeting will decide how to adjust borrowing costs.
In addition, on Thursday, August 22, the European Central Bank also released the minutes of its July meeting, which stated, "The September meeting is widely seen as a good time to reassess the level of monetary policy constraints."
However, according to their decision records, they still committed to maintaining an open-minded approach to the September meeting in light of the persistent risks to the inflation outlook, and will not overly focus on specific single data.