ECB/Kazimir: A Gradual, Step-by-Step Approach Remains the Most Prudent Strategy

Forex - Peter Kazimir, member of the ECB Governing Council and Governor of the Slovak National Bank, stated that the European Central Bank must continue to lower interest rates in small steps and resist the temptation to support growth in a currency bloc largely beset by structural flaws.

In a blog post, Kazimir said, “Maintaining a gradual, step-by-step approach through 25 basis point rate cuts remains the most prudent strategy. A more aggressive monetary expansion would require a dramatic change in conditions to justify it.”

The ECB cut its growth forecast for the 20-country Eurozone last week and noted that risks remain tilted toward more negative outcomes, particularly if the new U.S. administration imposes trade barriers.

However, Kazimir remarked that looser monetary policy is merely a band-aid for deeper structural flaws and not a real solution. “Low interest rates may provide some relief but cannot replace vital reforms,” Kazimir stated, adding, “Europe’s economic malaise is largely structural and requires solutions that go beyond the realm of monetary policy. We must resist the tendency to overreact to short-term pressures.”