European Central Bank Governing Council member Boris Vujcic said officials need more data about the trajectory of inflation to judge whether interest rates have risen far enough.
(Bloomberg) — European Central Bank Governing Council member Boris Vujcic said officials need more data about the trajectory of inflation to judge whether interest rates have risen far enough.
“We are now certainly in the restrictive territory,” the head of Croatia’s central bank told Bloomberg TV in an interview on the sidelines of the Federal Reserve Bank of Kansas City’s annual symposium in Jackson Hole, Wyoming.
“Whether we are in a restrictive-enough territory remains to be seen. And this is something that you will only see from the inflation data that will come in the next prints.”
ECB officials are considering pausing their toughest ever monetary-tightening campaign after raising borrowing costs to 3.75% from -0.5% in a little more than a year.
Since they last met in July, data have indicated the economy is faring worse than expected, with business surveys by S&P Global this week showing that the services sector is following manufacturing into a downturn. There are also signs that underlying inflation, policymakers’ preferred measure of price gains, has peaked.
While the data suggest that economic activity is cooling, “we don’t see that much of it in the inflation rates,” Vujcic said. The question for the coming months will be whether services inflation eases sufficiently and “whether we will feel the consequences of the slowdown in the labor market.”
Bundesbank President Joachim Nagel also told Bloomberg TV earlier on Thursday that he’s seeking more data before making up his mind on the next policy move, and that it’s “much too early” to think about pausing interest-rate increases. Portuguese central-bank chief Mario Centeno struck a more moderate tone, urging officials to move cautiously as downside risks to the economy are materializing.
Vujcic said he thinks the euro-zone economy can avoid a “real recession” and that a soft landing is still achievable.
While the ECB currently expects to reach its 2% inflation goal in 2025, Vujcic said that “by spring next year, we will have a clearer picture of whether we are firmly on the path toward achieving that or we will have to do more.”
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