Euro Zone Inflation Outlook

FRANKFURT (Reuters) – Euro zone inflation is increasingly likely to return to target next year, but a bit more evidence is needed before the European Central Bank can declare victory, Slovak central bank chief Peter Kazimir said on Monday.

Kazimir, an outspoken conservative, was among the few policymakers to question the necessity of cutting rates this month but eventually supported the move, marking the third easing step this year.

> "If new data and forecasts confirm an accelerated pace in disinflation, we will be in a strong and comfortable position to continue the easing cycle," Kazimir noted in a blog post.

Kazimir emphasized that the ECB must remain open-minded about December, keeping all options under consideration until more evidence is available.

> "I'm increasingly confident that the disinflation path is on solid footing," he stated. "But the doubting Thomas in me still needs to see further proof of a sustainable return to target."

Currently, markets anticipate that the ECB will implement rate cuts at each of its upcoming meetings through next March or even April, with expectations that the 3.25% deposit rate could drop to 2% sometime next year.

However, Kazimir cautioned that the expected decline in wage growth and services inflation has yet to appear. The ECB should wait for actual evidence of this development before claiming victory.

> "If new information points to higher inflation risks, we can still slow down the pace at which we remove restrictions in the coming meetings," he warned.