Governor Peter Kažimír: When staying put means moving forward

Last week’s decision to maintain the current interest rates was both prudent and canny. It aligns perfectly with our ongoing strategy to closely monitor and analyse incoming data without precommitting to any specific action.

That being said, the doors remain open to additional easing should the environment warrant and justify such action. Financial markets are betting on two more rate cuts before the year ends. While this isn’t entirely misplaced, it should not be taken as a given or a baseline scenario.

Our decision to hold rates steady comes in the context of reaffirmed expectations for a gradual disinflationary trend and steady economic recovery. The June cut was an important step, signalling our growing confidence that inflation will continue its downward trajectory from record highs. However, we acknowledge that the path to our inflation target will be uneven. Services inflation is currently a prime example of how stubborn inflationary pressures can be.

Let there be no mistake: we are on track to return to our target, but we are clearly not there yet. Vigilance is essential. Due to various factors, both domestic and global, there is still a non-negligible risk of inflationary pressures re-emerging.

I said this in June, and I reiterate it now: it is crucial to stay cautious to avoid misplaced bets and hasty decisions. The eurozone’s economic situation remains fragile, with risks to growth tilted somewhat to the downside.

There is no need to rush our decisions; the current outlook fully supports a measured and well-calibrated approach. Enjoy the summer lull and wait for the much-anticipated September “health check”. The upcoming data, combined with fresh forecasts, will set the stage for any necessary decisions.

In conclusion, our current stance is justified by the data at hand. We’re free with hands fully untied. We will remain vigilant and flexible, ready to adjust our policies based on future developments.

Patience and careful analysis are our best guides. They always will be., to do whatever is necessary.