Latest news with #Vujcic
Bloomberg
25-04-2025
- Business
- Bloomberg
ECB's Vujcic Says Current Tariffs Not Worst Scenario for Europe
European Central Bank Governing Council member Boris Vujcic said the current configuration of US tariffs isn't the most detrimental for euro-zone growth — striking a more upbeat tone on the outlook than some of his colleagues. Levies imposed by the US and China on each others' products are 'prohibitive,' while Europe is still able to trade with both countries, Vujcic said on the sidelines of the International Monetary Fund's spring meetings in Washington. Some of the recent developments on financial and commodity markets are also working in its favor, he said.
Observer
13-02-2025
- Business
- Observer
ECB can keep cutting rates even If Fed takes it slow, Vujcic says
ZAGREB: The European Central Bank (ECB) could cut interest rates three more times this year, even if the US Federal Reserve moves more slowly, but policy easing depends on a rapid decline in underlying inflation, Croatian policymaker Boris Vujcic said. The ECB has lowered borrowing costs five times since last June and hinted at further cuts, leaving investors speculating on the pace and extent of additional easing. "The market is pricing in three more rate cuts this year," Vujcic said in an interview. "Those expectations are not unreasonable." However, upcoming data will be crucial, as projections indicate a significant drop in services inflation—the largest component of the consumer price basket and a key driver of excessive price growth over the past year. "For those rate cuts to materialize, we need to see a slowdown in core inflation and services inflation," Vujcic, considered a moderate policy hawk, said. Vujcic argued that the ECB can continue easing even if the Federal Reserve holds back. The Fed stated last month that it was in no hurry to cut rates, and unexpectedly high January inflation has raised the possibility that it might not cut at all in 2025. High US interest rates generally strengthen the dollar and increase long-term borrowing costs, but Vujcic said current market movements do not pose a concern. "The exchange rate is one factor we consider, but at the current level, it's not something we need to worry about." The euro has fallen about 7% against the dollar since autumn but has declined less than 3% on a trade-weighted basis, a relatively modest shift. A weaker euro raises inflation in the eurozone by making imports—especially energy—more expensive. The ECB should avoid guiding investors on how far rates will fall, Vujcic said, but discussions on the terminal rate are expected to intensify soon. He suggested that the central bank may already adjust its language at the March meeting. Currently, the ECB describes its policy stance as "restrictive," but another rate cut would lower the deposit rate to 2.5%, a level at which some policymakers may question whether it is still high enough to restrain the economy. "We are certainly getting close to the discussion on when we should remove 'restrictive' from our language," Vujcic said. "This could already happen at our next meeting, but it will depend on incoming data. "It should happen when it's no longer possible to say with full certainty that you're still in the restrictive zone," he added. Weak economic growth in the 20-nation eurozone may slow inflation, but further deterioration is unlikely. Consumption has been especially weak—accounting for the biggest deviation from expectations—but conditions remain in place for a recovery, supported by high savings, rising incomes, and strong employment. "I don't see much of a risk for a recession. Then again, I also don't see any rapid recovery happening," Vujcic said. One reason for optimism is increased labor market flexibility. Some firms struggling with weak demand are reducing working hours instead of laying off staff, which could help maintain consumer confidence by easing fears of job losses, he added. — Reuters
Reuters
13-02-2025
- Business
- Reuters
ECB can keep cutting rates even if Fed takes it slow, Vujcic says
ZAGREB, Feb 13 (Reuters) - The European Central Bank could cut interest rates three more times this year even if its U.S. counterpart moves more slowly but policy easing is predicated on a rapid fall in underlying inflation, Croatian policymaker Boris Vujcic said. The ECB has lowered borrowing costs five times since last June and hinted at even more policy easing, leaving investors guessing about the pace and extent of any further rate cuts. "The market is pricing three more rate cuts this year," Vujcic said in an interview. "Those expectations are not unreasonable." However, data in the coming few months will be critical because projections foresee a big drop in services inflation, the single largest component of the consumer price basket and a key driver of excessive price growth in the past year. "For those rate cuts to materialise, we need to see a slowdown in core inflation and a slowdown in services inflation," Vujcic, considered a moderate policy hawk, said. Cuts can go ahead even if the Federal Reserve holds back, Vujcic argued. The Fed last month said it was in no hurry to ease, and unexpectedly high inflation in January raised the possibility it might not even cut rates at all in 2025. High U.S. interest rates imply a stronger dollar and rising longer-term borrowing costs, but market moves so far raise no undue concern, Vujcic said. "The exchange rate is one factor we consider but, at the current level, it's not something we need to worry about." The euro is down by about 7% against the dollar since the autumn but this is less than 3% on a trade-weighted basis, a relatively small shift. A weaker euro boosts inflation at home because it makes imports, especially for energy, more expensive, impacting prices quickly. LANGUAGE CHANGE The ECB should not guide investors on how far interest rates will fall, Vujcic said, but he expected the debate on the terminal rate to intensify soon and the bank could already change its language at the March meeting. The ECB still describes its policy setting as "restrictive" but one more rate cut will take the deposit rate to 2.5%, where some policymakers might start doubting whether it was still high enough to hold back the economy. "We are certainly getting close to the discussion on when we should remove 'restrictive' from our language," Vujcic said. "This could already happen at our next meeting, but it will also depend on the incoming data. "It should happen when it's no longer possible to say with full certainty that you're still in the restrictive zone," he added. Weak economic growth in the 20-nation euro zone could also prove a drag on inflation but growth conditions are unlikely to deteriorate further. Consumption has been especially weak, accounting for the biggest deviation compared to expectations, but conditions remain in place for a consumption-led recovery given high savings, the rebound in incomes and buoyant employment. "I don't see much of a risk for a recession. Then again, I also don't see any rapid recovery happening," Vujcic argued. Part of the confidence in growth stems from an increase in labour market flexibility. Some firms struggling with weak demand are reducing working hours instead of laying off staff and this is likely to foster consumer confidence as workers may be less worried about losing their jobs, Vujcic added. For key quotes from the interview, click here.
