MNI BRIEF: Last Mile Likely Bumpy After June Cut-ECB's Kazaks

The European Central Bank is heading to cut rates by 25 basis points at its meeting in June, reversing the “insurance hike” of September 2023, but while the eurozone may achieve a soft landing it is too early to declare victory over inflation and there is no assured subsequent rate path, ECB Governing Council member and Bank of Latvia Governor Martins Kazaks told an MNI Connect event in his opening presentation.

The “last mile” of reducing inflation may still be “rather bumpy”, Kazaks said, adding that wages, productivity and profit margins warrant continuing attention as the ECB remains data-dependent and that structural reforms to boost productivity will be key to avoiding future constraints on monetary policy.

Slower wages growth may be required to keep inflation in check, though the neutral rate of interest, at which policy is neither restrictive nor stimulative, is set to be low in the medium term, he said. (See MNI ECB WATCH: On Course For June Cut, Still Data-Dependent)