The European Central Bank (ECB) may soon shift its monetary policy towards gradual interest rate cuts, according to ECB Governing Council member Martins Kazaks. In an interview with Latvia’s public broadcaster, Kazaks expressed that a step-by-step reduction in rates could be the most appropriate approach for the Eurozone economy.
“The base scenario at the current moment—and to my mind the one that is the most appropriate—is to continue to lower rates step by step,” Kazaks stated.
After a series of interest rate hikes aimed at combating high inflation, signs of economic slowdown and moderating inflation have prompted discussions about easing monetary policy. The latest data from Eurostat indicates that inflation in the Eurozone has been gradually declining, although it remains above the ECB’s target of 2%.
The ECB has previously signaled expectations for inflation to gradually decrease towards its target by 2025. Kazaks’ remarks suggest that the central bank might consider adjusting its policy stance to support economic growth while keeping inflation in check.
Global economic uncertainties, including potential shifts in international trade policies, pose additional challenges. Kazaks highlighted the importance of avoiding trade wars, noting that tariffs and increased protectionism could harm Europe’s export-driven economy.
“It’s still unclear what will actually happen, but Europe must avoid escalating any trade war,” Kazaks warned. “Tariffs will not be good for Europe, especially given our orientation towards exports and foreign trade.”
As the Eurozone navigates these complex dynamics, the prospect of gradual rate cuts could provide much-needed stimulus. Market observers will be closely monitoring the ECB’s forthcoming decisions for indications of how the central bank plans to balance growth and inflation in the coming months.
Reference(s):
cgtn.com
