ECB’s Vujčić: Don’t Expect Much Impact on Monetary Policy if Trade Threat Is a One-Off

20 January 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Boris Vujčić said on Monday that the threat posed to trade by US President Donald Trump would only impact the ECB’s monetary policy if it changed expectations, but not if it was a one-off.

In a webcast about the future of inflation, Vujčić, who heads the Croatian National Bank, said that ‘if this is a kind of a thing that … is a one-off which only changes relative prices, then it will not have much impact, I think, on the monetary policy.’

However, if it turned out to be more of a ‘trade war’ and led to a ‘change in expectations’, that would have greater impact, he said.

The ECB was getting its models ready to incorporate the effect of what would happen trade-wise, he said, but couldn’t predict the outcome a priori.

‘There’s no better policy at the moment than just to wait to see what happens and then try to act as fast as possible and as precise as possible to try to estimate the impact’, he said.

In the past, the pass-through of the exchange rate to monetary policy had been ‘relatively low’, below 10%, he indicated.

However, he added that ‘we can assume that in a long higher inflation environment, it could be higher and it can have some impact on the inflation rate.’

As the ECB got closer to the neutral rate, risks to inflation should be balanced and now were, he said.

Asked about the household consumption growth expected by the ECB that had not yet materialised, Vujčić said ‘I would still expect the household consumption to pick up.’

Despite the recent repricing by the markets about rate cut expectations,these were ‘reasonable’ and he was not uncomfortable with them, he said.