Published by Global Banking & Finance Review®
Posted on March 10, 2025
2 min readLast updated: January 24, 2026
The ECB must be flexible on rate cuts amid inflation risks, says Kazimir. Investors expect a potential cut in June, with inflation targets revised to 2026.
FRANKFURT (Reuters) - There are still plenty of upside risks to euro zone inflation, so the European Central Bank must remain open-minded on whether to press ahead with interest rate cuts or pause them, Slovak central bank Governor Peter Kazimir said on Monday.
The ECB cut rates for the sixth time since June on Thursday but raised the prospect of a pause, given exceptional uncertainty over U.S. tariffs, increased defence spending and volatile energy prices.
"Inflation risks remain tilted to the upside," Kazimir said in a blog post. "History taught us that tariffs slow growth and boost inflation — precisely what we aim to avoid."
This complexity means the ECB needs to be flexible and not commit to a decision without hard evidence in data.
"This flexibility means staying open-minded and keeping all options open, whether we decide to cut again or pause," Kazimir added.
The ECB had previously predicted inflation would reach its 2% target just after mid-2025 but last week it revised its forecasts, seeing it back at target only in the first quarter of 2026.
"I am still looking for undeniable confirmation that disinflation will stay," Kazimir added. "Now is not the time for automatic decisions or rushing."
Investors have priced out one full rate cut in the past week and now see about 40 basis points of moves over the rest of the year, meaning one or two more steps are expected.
Markets see a pause in April as a more likely outcome but a cut in June, when the ECB publishes new economic projections, is fully priced in.
(Reporting by Balazs Koranyi; Editing by Hugh Lawson)
Kazimir stated that inflation risks remain tilted to the upside and emphasized the need for the ECB to be flexible in its decision-making.
The ECB cut rates for the sixth time since June but raised the possibility of a pause due to uncertainties like U.S. tariffs and energy prices.
The ECB had previously predicted inflation would hit its 2% target just after mid-2025, but it has now revised this forecast to the first quarter of 2026.
Investors have priced out one full rate cut and now anticipate about 40 basis points of moves over the rest of the year, expecting one or two more steps.
Kazimir highlighted that flexibility is crucial for the ECB, allowing it to keep all options open without rushing into automatic decisions.
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