FRANKFURT, November 27, 2025 – European Central Bank (ECB) policymaker Martins Kazaks stated on Thursday that it is too early to discuss another interest rate cut for the eurozone. Despite projections for slightly lower inflation and moderate economic growth, underlying price pressures remain elevated, suggesting the ECB should maintain its current policy stance.

Background: ECB Rate Decisions

Earlier this year, the ECB halved its policy rate in response to a decline in eurozone inflation toward the bank’s 2% target. Since then, rates have remained on hold, even as inflation forecasts show modest easing. Kazaks emphasized that premature rate cuts could risk reigniting price pressures, particularly as inflation could turn out higher than expected.

“With the data we have received so far, I don’t think the time is ripe for discussing a rate cut,” said Kazaks, the Governor of the Bank of Latvia, in an interview.

Upcoming ECB Meeting

The ECB is scheduled to hold its next monetary policy meeting on December 18, 2025. Kazaks highlighted that policymakers would closely examine inflation projections for 2026 and 2027, noting that medium-term data is more relevant than the ECB’s initial 2028 estimates.

“Monetary policy operates over one to two years, so projections three years out carry a wide margin of error,” Kazaks explained, stressing caution in policy adjustments amid economic uncertainty.

Inflation Outlook

The ECB’s latest projections from September 2025 forecast inflation at:

• 1.7% in 2026
• 1.9% in 2027

Kazaks acknowledged that factors such as the likely postponement of the EU’s ETS2 emissions trading system could ease inflation temporarily. However, he urged policymakers to remain attentive to core inflation, which has consistently stayed above 2%, reflecting persistent underlying price pressures.

Risks to Inflation

Kazaks identified both downside and upside risks to inflation:

• Downside risks: ETS2 delays, influx of Chinese goods into European markets, and potential euro appreciation
• Upside risks: Trade fragmentation and other unpredictable geopolitical or economic shocks

The ECB continues to balance these risks carefully, signaling that monetary policy will remain cautious until inflation trends become clearer.

Market Reactions

Financial markets have responded cautiously to the ECB’s outlook. Recent U.S. stock movements, with the Dow and S&P 500 rising more than 0.6%, reflect investor optimism about global economic stability, though European markets remain sensitive to ECB policy signals.