COPENHAGEN (Reuters) -The European Central Bank must not try to micromanage monetary policy and should only cut interest rates again if price growth is heading below target without rebounding, Croatian central bank chief Boris Vujcic said on Wednesday.
The ECB has been on hold since June and policymakers are debating whether more easing is needed since price growth is set to dip below its 2% goal next year.
Most policymakers argue that no action is needed since projections show inflation coming back to target in 2027. However, a few are warning that below-target readings risk pulling down expectations and perpetuating anaemic price growth, much like in the pre-pandemic years.
“For another cut, you would have to see the inflation path going down,” Vujcic told a Danske Bank conference in Copenhagen. “So, not going down and then returning.”
The comments echo warnings from other policymakers cautioning against acting on small, temporary deviations from target.
Markets see virtually zero chance of a rate cut on December 18, when the ECB releases fresh inflation projections, including its initial numbers for 2028. But investors still see a one-in-three chance of a cut by mid-2026.
“Micromanaging monetary policy to hit exactly the 2% target is pretty much an impossible task and only introduces unnecessary volatility,” Vujcic said. “If pressures would become more persistent, on one side or the other, that’s a different thing and would require a change in the monetary policy status.”
He added that tariffs may still cause some inflation volatility and climate change makes food prices harder to predict.
(Reporting by Jacob Gronholt-Pedersen; writing by Balazs Koranyi; Alex Richardson and Sharon Singleton)
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