A leading voice within the European Central Bank (ECB) is suggesting a potential pause in interest rate cuts. Boris Vujčić, Governor of the Croatian National Bank and an ECB Governing Council member, indicated in an interview with the Handelsblatt that policymakers should await further data before making decisions at the next Council meeting.
Vujčić specifically referenced the upcoming release of key economic indicators – including inflation figures, economic growth data and forward-looking assessments – to inform future policy actions. He believes these developments will offer greater clarity regarding the appropriate course of action. While market anticipation leans towards another potential interest rate adjustment between September and the year’s close, Vujčić expressed that this expectation doesn’t present a concern.
The ECB has reduced its key deposit facility rate eight times since summer 2023, currently standing at 2%. Inflation currently mirrors this rate. Unlike some of his counterparts, Vujčić doesn’t express significant worry about inflation potentially falling below the target level. He views inflationary risks as relatively balanced, both upwards and downwards, suggesting that minor deviations from the target are likely to be transient.
Looking back on Croatia’s adoption of the Euro in 2023, Vujčić delivered a resounding endorsement, stating that the benefits anticipated have been realized. He refuted claims that the common currency inherently leads to higher price levels, dismissing the assertion as a widespread misconception that is difficult to challenge.