Governor Peter Kažimír: Slow and steady wins the race

Our September call to cut the key interest rate was straightforward and unanimous.

It keeps monetary policy sufficiently tight to push inflation towards the desired level as soon as the next year. At the same time, it provides some relief to our economy.

Last week’s decision definitely doesn’t mean we’re on a path to cut rates every time we meet.

We stay open-minded, but from my perspective, there is still more risk that inflation will be higher over the medium term than we currently project.

I would require a significant shift, a powerful signal, concerning the outlook to consider backing another cut in October. But the fact is that very little new information is in the pipeline.

We will almost surely need to wait until December for a clearer picture before making our next move.

So, right now, my view is that slow and steady wins the race.

We are carefully lifting the level of restriction layer by layer. If actual developments in the coming quarters do not confirm our projections, we could regret rushing to do more now.

Inflation, especially in the services sector, is still persistent. Our outlook relies on a significant slowdown next year, but this slowdown might not come.

People’s price expectations are delicate, and the last thing we want is to shake that confidence. It wouldn’t help.

Our economy’s recovery has been disappointingly weak. There is a sense of lack of confidence everywhere.

But let’s be clear—lowering rates isn’t a magic fix, as some may expect. Yes, it will provide an impetus for the economy to an extent, but Europe’s economy has deeper challenges.

Mario Draghi highlighted in his report that the real issues are structural: competitiveness, innovation, and long-term growth.