ECB’s Vujcic Says No Interest-Rate Cuts Expected in Short Term

Misha Savic, Bloomberg News

Boris Vujcic, governor of the Croatian National Bank, during an interview at the central bank in Zagreb, Croatia, on Monday, Sept. 19, 2022. The European Central Bank's newest policy maker has plenty to say on the danger of consumer prices running out of control during a war, Vujcic can remember only too well how his country suffered inflation of 1,500% during the 1990s as it fought for independence. , Bloomberg

(Bloomberg) -- The European Central Bank won’t cut borrowing costs in the near future if its forecast on the economy proves correct, according to Governing Council member Boris Vujcic.

“If our projection, the way it is, proves right in 2024 and 2025, then it’s quite certain that there will be cuts in interest rates,” Vujcic said in Belgrade on Tuesday. “It’s not something to be expected short-term, it’s too early to talk about that.”

Inflation is slowing more quickly than anticipated, prompting markets to bet on rate cuts as soon as March. Those wagers were stoked on Tuesday after Executive Board member Isabel Schnabel said further rate hikes were unlikely, softening her previous stance.

Policymakers gather for their final meeting of the year in Frankfurt next week, where they are almost certain to keep rates on hold for a second time.

“If our projections are right, in that case there won’t be additional changes in rates,” Vujcic said, “The baseline scenario is that rates won’t rise further, but we said that we’re data-dependent and that in the future we will watch incoming data and, based on them, conclude what to do.”

Still, a scenario of another rate increase “cannot be entirely ruled out,” he said. “Although, I say again, it’s not the baseline scenario.”