Croatian Central Bank President Boris Vujić said on Wednesday that the European Central Bank should not try to micromanage monetary policy, and should cut interest rates again only if price growth is below the target without a rebound.
The ECB has been on hold since June and policymakers are debating whether further easing is needed as price growth is expected to fall below its 2% target next year.
Most policymakers argue that no action is needed because expectations are that inflation will return to target in 2027. However, some warn that below-target readings threaten to upend expectations and perpetuate the anemic price growth of the pre-pandemic years.
“For another cut, you would need to see inflation on a downward path,” Vujicic said at a Danske Bank conference in Copenhagen. “This is not a fall followed by a comeback.”
These comments echo warnings from other decision makers who caution against acting on small, temporary deviations from the target.
Markets see almost no chance of a rate cut on December 18, when the European Central Bank releases new inflation forecasts, including its preliminary numbers for 2028. But investors still see a one in three chance of a rate cut by mid-2026.
“Micromanaging monetary policy to exactly achieve the 2% target is a practically impossible task and only creates unnecessary volatility,” Vujicic said. “If pressures become more persistent, from one side or the other, that is a different story and will require a change in monetary policy posture.”
He added that tariffs could still cause some fluctuations in inflation and that climate change is making predicting food prices more difficult.