Published by Global Banking & Finance Review®
Posted on September 15, 2025
2 min readLast updated: January 21, 2026
ECB's Kazimir suggests maintaining current policy despite minor inflation deviations, focusing on long-term stability and economic outlook.
FRANKFURT (Reuters) -The European Central Bank should not adjust policy in the case of small deviations from its inflation target and should instead focus on the big picture, ECB policymaker Peter Kazimir said on Monday.
The ECB left interest rates unchanged on Thursday and maintained an upbeat view on the economy, indicating that it was in no hurry to cut rates again, even with inflation set to dip below target in both 2026 and 2027.
"We need to stay away from moving on small, tiny deviations from the target because we know they will come," Kazimir said in a blog post. "We need to stay focused on what's beyond these temporary wobbles."
The ECB's strategy allows for "inevitable" short-term deviations from its 2% target and calls for action only in case of large, sustained under or overshooting, a standard vague enough to leave room for debate.
The bank's own projections show inflation below 2% for six straight quarters from the start of 2026 and some policymakers argue that this is long enough for firms to change their pricing and wage-setting behaviour, risking entrenching anaemic price growth.
But Kazimir, a policy hawk who has cautioned against easing too much, warned that risks were also to the upside and the ECB would err by ignoring this.
Financial investors now see just a 40% chance of one final rate cut, sometime in the spring, adding to policy easing worth 2 percentage points in the year to June.
Repeating the bank's long-standing guidance, Kazimir said he remained open minded about future policy decisions, which would be taken meeting by meeting, based on incoming data.
"Monetary policy must remain nimble," Kazimir said. "We are free, with our hands fully untied, to do whatever is necessary to preserve stability."
(Reporting by Balazs Koranyi; Editing by Kirsten Donovan)
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic goals such as controlling inflation, consumption, growth, and liquidity.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured as an annual percentage increase.
The European Central Bank (ECB) is the central bank for the euro and is responsible for monetary policy within the Eurozone, aiming to maintain price stability and oversee the euro's value.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are a key tool in monetary policy.
Long-term inflation projections are estimates of future inflation rates over an extended period, typically used by policymakers to guide monetary policy decisions.
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