ECB may lower interest rates amid ongoing economic debate
(MENAFN) Martins Kazaks, a member of the European Central bank (ECB) Governing Council and governor of the Latvian central bank, indicated that the ECB might lower borrowing costs at its upcoming meeting this month. In a statement to local media on Wednesday, Kazaks suggested that, based on current data, there is a possibility of taking further steps to reduce interest rates. He acknowledged that while discussions among policymakers will be ongoing, the situation appears to support a move towards easing rates.
This potential rate cut comes amid growing divisions within the ECB regarding the economic outlook for the Eurozone. Some members are concerned about the risks of a recession, while others are focused on persistent inflationary pressures. The ECB is anticipated to implement its second interest rate cut in September, following the first reduction in June, as inflation shows signs of deceleration. Although inflation has dropped to its lowest level since mid-2021, some policymakers argue that the fight against high prices is not yet over.
Market expectations now include the possibility of two or three additional rate cuts within this year, with further reductions anticipated in 2025. Kazaks pointed out that while rising service costs due to higher wages are a concern, wage growth is currently slowing, which might warrant a more gradual approach to easing monetary policy. He noted that although most of the inflation issues have been addressed, the primary discussion among ECB members remains centered on the pace and aggressiveness of future rate cuts.
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