Insights 
VT 
The Governor of the National Bank of Slovakia, Peter Kazimir, shared insights into the current rate cut cycle. He conveyed that the Bank is nearing the end of its rate cut cycle, although final decisions depend on upcoming data.
Kazimir emphasised that information gathered over the summer will help determine if further adjustments are necessary. The European Central Bank recently reduced its deposit rate for the eighth time in this cycle, hinting at a possible pause.
Data Analysis Focus
The focus will be on analysing incoming data to inform future actions. Specific concerns include the possibility of weaker-than-expected growth and ongoing risks to inflation.
Kazimir’s comments reflect a broader sentiment amongst policy makers that the bulk of the monetary easing—at least for this cycle—may now be behind us. His precise language, particularly his reference to the upcoming summer data, suggests a methodical, data-led approach moving forward. Though decisions have not been finalised, the probability of further rate reductions this year appears lower unless economic conditions shift substantially.
In recent months, benchmark changes have begun to slow. Many of us anticipated another trim in the deposit rate by the ECB, which has now marked its eighth since the initial move. However, the tone has grown more reserved. Policy makers are beginning to signal more patience, perhaps implying an extended assessment period rather than immediate follow-through actions.
Growth and Inflation Concerns
Concerns around growth continue to weigh, particularly as recent forecasts from institutions have started to edge lower. More worryingly for rate setters are the upside inflation risks that have not fully dissipated. While energy prices have stabilised to a degree, services inflation remains sticky and may complicate efforts to bring overall inflation closer to target.
From our side, what’s key in the short term is not to assume that previous trends will automatically continue. Instead, we treat the pause in rate moves as an indication that flexibility is returning to central banking decisions. Reading too much into single policy moves could be misleading. What matters now is parsing incoming economic indicators carefully—particularly those from the larger eurozone economies and wage negotiation outcomes.
The messaging from Bratislava also points towards acknowledgement of timing. Kazimir’s indirect caution about the summer period being decisive can be read as a call to closely study second-quarter data. Wage growth readings, survey sentiment, and month-on-month core inflation prints will likely be among the more influential markers in the coming weeks, with any earlier seasonal anomalies now less likely to skew interpretation.
We expect front-end interest rate markets to remain sensitive to revisions in ECB expectations. Pricing in a pause—potentially followed by an extended hold—means implied volatility could drift lower, unless economic figures surprise meaningfully. For now, rate traders should operate under the assumption that short-maturity instruments have likely absorbed most of the easing effects for 2024.
Longer-dated contracts, however, may still embed some optionality around recession risk. Decent risk-reward could still be found in selectively positioning around residual expectations for growth deterioration, as long as inflation doesn’t reverse beyond acceptable margins. The trade-off between core indicators and headline inflation will probably remain the key driver across floating rate products.
We should also remember that market expectations tend to run ahead of policy statements. Data dependency means forecasts might shift again by late July, especially if consumer demand softens or forward-looking PMIs lose momentum. Given that, tactical positioning should prioritise nimbleness and avoid exposure to overly linear rate paths.
