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Governor Peter Kažimír: The long-expected pause button pushed

As widely expected, we’ve hit the pause button on Thursday to thoroughly assess the strengthening impacts of our policy decisions on inflation and the eurozone economy. A large chunk of our past decisions still needs to transpire into the real economy.

All those voices coining this as the end of the cycle should hold their horses. It’s too soon to declare victory and say the job’s done. 

As much as I would like this to be the end of the path, upside inflation risks have yet to dissipate entirely. We must stay vigilant.

Long story short, additional tightening could come, if incoming data force us to take such a step.

Therefore, I will eagerly await the December update of our inflation forecast to get a clearer picture, confirmation, that the decline in inflation is sustained. I hope that renewed upside inflation risks from the escalating tragic conflict in the Middle East will not materialize.

The eurozone’s economy, already exposed to a combination of growth-slowing factors, struggles to regain momentum.

December forecasts are one of two key milestones needed to pass. March is the latter.

By then, it should have become clearer how wage negotiations for the whole year turned out and whether the risks of a spiral of high prices and high wages were off the table.

Only then will we be able to say the tightening cycle is completed and move on to the subsequent – monitoring – phase.

As I have said several times, we will have to stay at the peak for the next few quarters.

Bets on rate cuts happening already in the first half of next year are entirely misplaced.

The December meeting is going to be a very interesting one.