There’s a lot of chatter right now about the European Central Bank (ECB) and whether they’re planning to slash interest rates next month. September is the month everyone’s watching.

Analysts are almost unanimous—over 80% of them—expecting the ECB to pull the trigger on a rate cut next month along with the Federal Reserve. They’re also betting on another one in December. 

The reason? Inflation isn’t backing down, and it’s still sitting above the ECB’s target of 2%. ECB President Christine Lagarde has said that any rate cuts will depend on the data, especially what’s happening with inflation. 

Christine Lagarde, the President of the European Central Bank

But with things as they are, it’s hard to see them holding back much longer. Right now, the ECB has its key interest rates set at 4.25% for main refinancing operations and 3.75% for the deposit facility. These were adjusted in June 2024, following a modest cut. 

But the mood is changing—there’s a lot of talk about more cuts coming our way. The ECB is playing it cautious, trying to steer inflation back to its target without crashing the Eurozone economy, which is already struggling with slow growth and rising prices.

Enter Martins Kazaks, a member of the ECB’s Governing Council and the head of Latvia’s central bank. He’s said straight up that he’s ready to discuss another rate cut in September. 

“Given the data we have at the moment, I would be very much open for a discussion of yet another rate cut in September.”

But Kazaks is not jumping the gun—he’s waiting to see the new forecast and August’s inflation data before making any final calls. He added that:

“Monetary policy has done a good job to push inflation down, to create a basis for growth, less uncertainty.”

But he also pointed out that there’s been a lack of structural improvements, which has meant that growth overall has been “relatively timid.”

During the July meeting, the ECB decided to keep an open mind, acknowledging the ongoing risks to the inflation outlook. Since then, things haven’t improved much. Productivity data didn’t meet the ECB’s expectations, although there was some good news. 

Martins Kazaks

Figures released recently showed that gains in negotiated wages have moderated in the second quarter, which could mean that inflation will finally return to the ECB’s 2% target by 2025.

Kazaks isn’t completely pessimistic. He thinks that the ECB’s goal of getting inflation back to 2% by 2025 is still within reach. 

But even if they do go ahead with a “couple” more decreases in the deposit rate—which is sitting at 3.75%—he believes that monetary policy will still remain restrictive enough to keep inflation in check.