Martins Kazaks, European Central Bank Governing Council member and Bank of Latvia Governor, said that the European Central Bank may cut interest rates two more times before the end of this year, given the gradual slowdown in inflation in the eurozone.
Market participants expect the ECB to cut interest rates again at its September meeting after easing monetary policy in June, as recent data confirm the assumption that consumer inflation will fall to the ECB's target level (2%) next year.
"Given that inflation is generally in line with ECB expectations, the arguments in favor of gradual policy easing remain unchanged. Our June forecasts suggested two more rate cuts this year, and now there is no reason to abandon this forecast," Kazaks said, adding that he wants to see inflation data for August and new ECB forecasts before supporting a rate cut in September.
Kazaks noted that broader trends in the economy are consistent with a decrease in price pressure, and this should eventually lead to a decrease in inflation rates.
"Our forecasts have already assumed relatively rapid wage growth, and this week we received data indicating an easing of wage pressure, which also confirms a gradual decrease in inflation. Corporate profit margins are also declining," Kazaks said, warning that the ECB should not allow further postponement of the target inflation rate, given the already significant delays.