ECB’s Vujčić: Prefer 25BP Cuts, But Exact Month We Start Matters to Markets, Not to Economy

30 January 2024

By David Barwick – ZAGREB (Econostream) – The European Central Bank should loosen monetary policy in 25bp moves when the time comes, but the exact month in which easing begins matters little from an economic standpoint, ECB Governing Council member Boris Vujčić said Tuesday.

Speaking on the margins of an event to mark Croatia’s first year of euro area membership, Vujčić, who heads the Croatian National Bank, said that ‘this difference between April and June doesn’t really make much difference for the economy.’

More important was a ‘smooth transition’ to rate-cutting, in which ‘25bp moves are preferable than to larger moves’, he said. Larger rate cuts are for when monetary authorities feel that they ‘are a bit behind the curve’.’

The pace at which cutting proceeded was also more important than the precise month of the first lowering of borrowing costs, which was mainly of interest to financial markets, he said. The pace ‘doesn’t have to be continuous’, he said.

The growth numbers released today confirmed the expectation of a soft landing and indicated that the risk of recession is receding, he said. The economy would pick up this year, with ‘so we’re going to have a modest rate of growth coupled with further disinflation’, he said.

‘We of course in thinking about the monetary policy rate moves look at the whole set of data, not at a single data at a single point in time, so we will still have to wait for more data … before we make a decision’, he said.