ECB’s Kazaks: Keeping 2% inflation will require some further cuts for fine tuning

• Quite likely keeping 2% inflation will require some further cuts for fine tuning.
• Market pricing of one more cut or so not out of the realm of the baseline.
• Fine-tuning cuts will very much depend on how the economy develops.
• May at some point, not yet by any means, go into accommodative territory.
• Must be cautious about potential persistence of undershooting.
• We need to take care of those risks of a too persistent or large deviation from target.
• So far, seems deflationary effect of trade tensions could dominate, but final outcome open.
• June cut to ensure that inflation in 2026 eventually turns the corner and starts returning towards 2%.

The ECB continues to look very confident that the risk ahead is undershooting on their 2% target and assigns very little risk to renewed inflationary pressures. Hope for them that they are right.

This article was written by Giuseppe Dellamotta at www.forexlive.com.