ECB Governing Council member Gediminas Simkus said today, “In my view, if there’s no new staggering data, current restrictive levels are sufficient,” to steer inflation back to target.

Highlighting the bank’s current approach, Simkus clarified, “There is and there was no need to raise rates at this point.” But, “Will we need this in the future? We still have to wait and see. I’m hopeful this won’t be needed.”

Addressing the speculation around potential rate cuts, Simkus was clear in his stance. “Inflation is still high, too high. Any talk about cuts is premature. We need strategic patience to keep rates at restrictive levels,” he asserted.

Dispelling any immediate expectations of a rate reduction, he added, “I’d be highly surprised to see a rate cut in the first half. I don’t think so.”

ECB Governing Council member Peter Kazimir dismissed speculations of impending rate cuts in the early months of 2024. Speaking earlier today, he stated emphatically, “Bets on rate cuts happening already in the first half of next year are entirely misplaced.” Instead, he alluded to a persistent approach, suggesting that “We will have to stay at the peak for the next few quarters.”

Addressing the growing sentiment that the current policy cycle is nearing its end, Kazimir urged caution. “All those voices coining this as the end of the cycle should hold their horses,” he remarked. “It’s too soon to declare victory and say the job’s done.”

While not entirely closing the door on further adjustments, Kazimir implied that any future policy decisions would be data-driven. “Additional tightening could come, if incoming data force us to take such a step,” he explained.

The unfolding situation in the Middle East remains a concern, especially given its potential implications on inflation. Kazimir shared, “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.”

Furthermore, Kazimir highlighted the significance of upcoming milestones before any definitive policy stance is taken. “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,” he added.

ECB’s latest Survey of Professional Forecasters for Q4 presents marginal adjustments to economic outlook for the 2023-2025 period. Also, headline inflation expectations underwent minimal changes for these years.

Regarding the HICP, inflation forecast for 2023 has been adjusted upwards to 5.6% from its earlier 5.5% estimation. The projections for 2024 remain steady at 2.7%, whereas for 2025, it was slightly dialed back to 2.1% from the prior 2.2% prediction.

On the core inflation front, 2023 remains unchanged at 5.1%. However, the following years see a minor downard revision, with 2024 expectations set at 2.9% (down from earlier 3.1%) and 2025 set at 2.2% (down from 2.3%).

Turning to Real GDP growth, 2023 projections are adjusted downwards to 0.5% an prior 0.6%. 2024 now stands at 0.9%, a reduction from 1.1% previously forecasted. Growth projection for 2025 remains steady at 1.5%.

Full ECB SPF results here.

At the post-meeting press conference, ECB President Christine Lagarde noted that risk to growth are “tilted to the downside”, with geopolitical tensions potentially shaking confidence among businesses and households.

On the other hand, growth could be higher if resilient labour market continue its course and real incomes rise. The world economy could grow “more strongerly than expected.

Lagarde also flagged potential upward risks on inflation from sources like escalating energy and food prices. She underscored the role geopolitical tensions might play in boosting short-term energy prices, while also drawing attention to the repercussions of the climate crisis, which could lead to unexpected hikes in food prices.

However, she also acknowledged scenarios where inflationary pressures could diminish, particularly if there’s a decline in demand. This could be due to factors such as a more pronounced impact of monetary policy or external economic challenges fueled by heightened geopolitical risks.

ECB keeps interest rates unchanged as widely expected. The main refinancing, marginal lending and deposit rates are held at 4.50%, 4.75%, and 4.00% respectively.

The central bank maintains that key interest are “at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal.”

Future decisions will ensure the policy rates are set at sufficiently restrictive levels for “as long as necessary”.

Nevertheless, ECB still “stands ready” to adjust all of its instruments.

Full ECB statement here.