ECB Close to Hitting Inflation Target, Policymaker says

The ECB cut interest rates for the seventh time in a year on Thursday but offered few signals about future moves, even as it warned that erratic US trade policy is bound to weigh on growth and risked heightened economic volatility.

“Inflation is approaching its target, and I am confident that we will reach it within the next few months,” Kazimir, Slovakia’s central bank governor, said in a blog post.

The bank earlier predicted that inflation would only get to 2 per cent in early 2026 so Kazimir’s comments suggest that price growth could fall quicker in the current environment than last forecast.

Kazimir also argued that rate cuts have now put the ECB’s 2.25 per cent deposit rate in a range that no longer restricts economic growth and it could be considered to be near a neutral stance.

Kazimir cautioned against trying to predict where policy is going because of risks and “today’s volatile and often chaotic conditions.”

“We are operating in a fast-shifting environment,” Kazimir said. “Uncertainty dominates the economic landscape.”

“Heightened global trade tensions, particularly those stemming from US tariff policies, have introduced significant ambiguity into the system, eroding confidence,” he added.

Markets still price at least two more rate cuts this year and see a 50 per cent chance of a third move, suggesting that the deposit rate could end 2025 at 1.50 per cent or 1.75 per cent.

Kazimir, however, insisted that decisions would be based on incoming data and the ECB was not on a preset course.

“June’s decision will depend heavily on new data, updated forecasts and risk assessment,” Kazimir said. “This reinforces our commitment to flexibility and agility.”

Source: Reuters