ECB Governing Council member Martins Kazaks indicated that recent data “clearly point in the direction of a cut” in interest rates at the upcoming October meeting. Kazaks highlighted the increasing risks to the Eurozone economy, noting that the balance between stubborn inflation, particularly in services, and weak growth is tilting toward the latter.
He emphasized that even after another 25bps cut, which would bring the deposit rate to 3.25%, the rate would still “restricts economic activity” and curb inflation in the services sector.
Kazaks expressed concern over the “worrying” state of the economy, especially the potential for a sudden weakening of the job market. “If corporates start to shed labor, this snowball may start rolling,” he cautioned, warning of the risks of a tipping point that could exacerbate economic decline.
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