The European Central Bank (ECB) is considering a reduction in borrowing costs at its upcoming meeting, according to a report from Bloomberg that cites ECB Governing Council member Martins Kazaks.
The Latvian central-bank chief indicated in an interview with Latvian TV that, with the upcoming ECB council meeting next week, he believes the current data suggests it may be time to move forward with lowering rates. He acknowledged that there would be discussions, as is customary, but expressed that, at this moment, the situation appears quite clear to him.
The ECB is preparing for a second rate cut following the initial reduction in June. The argument for another decrease has gained strength as inflation has fallen to its lowest point since mid-2021, although some policymakers have emphasized that the fight against rising prices is not yet over.
Investor expectations for future cuts
Investors are anticipating two or three additional cuts in borrowing costs this year, along with further actions in 2025. As the deposit rate approaches the 3 percent threshold from its current level of 3.75 percent, discussions among officials are expected to become more intense, according to sources familiar with the situation.
Kazaks pointed out that significant increases in service costs, fueled by rising wages, warrant a cautious approach, suggesting that any easing of monetary policy should be gradual. However, he noted that wage growth is beginning to moderate.
Kazaks stated that rates need to be reduced since a significant portion of the inflation issue has been addressed. He noted that the conversation now revolves around the pace and magnitude of the cuts.
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