(Bloomberg) -- The European Central Bank shouldn’t hurry to lower interest rates or spend too long right now contemplating how far and how quickly they should fall, according to Governing Council member Bostjan Vasle.
Taking policy decisions one step at a time and based on economic data is an approach that’s served policymakers well, the Slovenian official said in an interview in Washington. That guiding principle should be maintained as ECB borrowing costs approach levels that neither constrain nor stimulate growth, he said.
“The direction for policy is clear but I would still be very cautious regarding what we’ll do during each of the next meetings,” Vasle said. “I’m comfortable with being data dependent. I wouldn’t like to pre-commit to anything, let’s wait for the data.”
The remarks come as other ECB officials reveal their thoughts on how the final policy meeting of 2024, in December, should pan out.
Facing a stuttering economy and downside risks to inflation, Portugal’s Mario Centeno has floated the option of a half-point cut — twice the usual size. But others, including Bundesbank President Joachim Nagel, warn against any rush.
Markets see a spate of rate moves that will bring the deposit rate to 2% by mid-next year from 3.25% now.
Vasle argued that he hasn’t significantly changed his perspective on the economy since the ECB last published forecasts in September.
“We’re seeing some risks materializing indicating growth momentum will be weaker, especially this year,” he said. But “baseline remains growth this year and an acceleration next year, supported by private consumption.”
Signals on inflation have also been positive, according to Vasle, who highlighted a downward trend in services, in particular.
Prices in the sector are “showing some indication of moderation,” he said. “This will further strengthen the disinflation process.”
He described risks to the outlook for consumer prices as “more or less balanced, maybe slightly on the downside at the moment.”
That assessment is in line with the one offered by Lagarde last week following the ECB’s third rate cut since June.
“We are still in restrictive territory,” Vasle said. But “by lowering interest rates further, we’ll be at the upper limit of the neutral rate estimates.”
He wouldn’t elaborate on what will happen once the ECB has reached that point.
“I’m not saying that we’re going into an easing of monetary policy,” he said. “I’m just saying that we’re approaching the neutral position. Then we will see.”
--With assistance from Alexander Weber.
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