European zone inflation looks increasingly likely to return to target next year, but little more evidence is needed before the European Central Bank (ECB) can declare victory, Slovakia's central bank chief, Peter Kazimir, said on Monday.
Kazimir, an outspoken conservative who publicly expressed doubts about the need to cut rates this month, but ultimately agreed and supported the move, the third policy easing this year.
"If new data and forecasts confirm a faster rate of decline in inflation, we will be in a strong and comfortable position to continue the easing cycle," Kazimir said in a note.
Kazimir also argued that the ECB is waiting for more evidence and until then, they need to be open-minded about the December decision and keep all options open.
"I am more and more convinced that this inflation reduction path is on a solid foundation," said Kazimir. "But I still need further evidence of a sustainable recovery to the target."
Markets now expect the ECB to cut rates at each of its next meetings until March or April, and the 3.25% deposit rate is expected to reach 2% sometime next year.
Kazimir also warned that the long-awaited decline in wage growth and services inflation has yet to materialize and the ECB will have to wait for real evidence on this before declaring victory.
"If new information shows a higher risk of inflation, we can still slow down the rate of sanctions reduction in the next meeting," he said.
