ECB official Kazaks warns: "It is too early to talk about interest rate cuts; inflation risks still need to be watched."

Martins Kazaks, a member of the European Central Bank’s Governing Council, poured cold water on market expectations of an imminent interest rate cut, making it clear that, given that underlying inflation remains high and risks persist, it is too early to discuss further monetary policy easing.

In an interview with Reuters on Thursday, Kazaks said, “Given the data we have received so far, I believe it is not yet the right time to discuss rate cuts.” This statement comes ahead of the ECB’s next policy meeting scheduled for December 18, adding uncertainty to the central bank’s future rate path.

His remarks are a clear signal to investors: although the ECB cut its policy rate by half over the year up to June, policymakers remain as vigilant about inflation as ever. After June, despite forecasts pointing to slightly lower inflation and moderate economic growth, the ECB has kept rates at current levels. Kazaks’ comments suggest that any future rate cuts are not a done deal.

He stressed that the “core inflation rate far above 2%” is a key reason for his cautious stance. He believes there are two-way risks to the inflation outlook, and now is not the time to let down one’s guard.

Focus on 2026–2027 Inflation Projections

For the upcoming December meeting, new inflation forecasts will be key to decision-making. At that time, ECB policymakers will receive inflation projections for the next three years.

Kazaks specifically highlighted the figures for 2026 and 2027. He pointed out that “monetary policy transmission takes one to two years,” so compared to more uncertain longer-term forecasts, data for the next two years are more valuable as a reference. He thinks that “the margin of error for a forecast three years out is very wide, especially under the current level of uncertainty.”

According to the latest ECB projections published in September, inflation is expected to be 1.7% in 2026 and 1.9% in 2027, both close to or below the 2% target. Updated figures released at the next meeting will play an important role in gauging the central bank’s future moves.

Upside Inflation Risks Cannot Be Ignored

When assessing the inflation outlook, Kazaks acknowledges that there are factors that may drag inflation lower. He mentioned that a possible delay in the EU’s ETS2 emissions trading system could “flatten” the inflation curve. In addition, dumping of overseas commodities in the European market and a possible appreciation of the euro are also seen as downside risks to inflation.

However, he also pointed out that these downside risks are “better known.” He warned that policymakers should not ignore upside risks to inflation, such as price pressures that may arise from trade fragmentation. Kazaks stressed again that ECB colleagues should “keep paying attention to core inflation, which remains well above 2%,” underscoring that controlling underlying price pressures remains a central concern for the ECB.

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