FRANKFURT, Feb 9 - A pronounced break from projected economic or inflation paths would be required for the European Central Bank to rethink its current stance, Slovak central bank governor Peter Kazimir said on Monday, following the ECB's recent decision to keep interest rates unchanged.
Kazimir said the bank has been effectively paused since it stopped cutting rates in June and is operating on the assumption that inflation will stabilise around the ECB's 2% target. That outlook has, he noted, strengthened market expectations that policy will remain on hold through the year, with the potential for rate increases next year.
"Looking forward, it would take a major departure from our baseline scenario for me to consider recalibrating the policy setting," Kazimir wrote in a blog post. "For now, the baseline holds."
The governor, generally viewed as a policy hawk, said the internal ECB debate has been unusually narrow recently. Nearly all public speakers have presented a broadly similar assessment of the outlook, even though some officials have warned of downside risks to inflation that could eventually challenge the ECB's assessment that it is in a "good place."
Kazimir reiterated the ECB's view that inflation risks are balanced, but he emphasised that this balance depends significantly on favourable energy price trends. He said stronger-than-expected economic growth could exert upward pressure on prices, while a further appreciation of the euro would act as a dampener by lowering import costs.
"Any further appreciation will have to be evaluated against the relative strength of the euro area’s economic performance and ultimately our medium-term inflation target," he wrote.
Kazimir also highlighted that uncertainty remains exceptionally high, that volatility is likely to persist in the months ahead, and that the overall situation is fragile.
This statement from Kazimir reinforces the ECB's current posture: policy is likely to remain unchanged absent a material and sustained shift in inflation or growth dynamics, while risks tied to energy prices, economic momentum and exchange rate moves will be monitored closely.