ECB: a marked slowdown in the economy could accelerate the pace of rate cuts

(Boursier.com) — A major slowdown in the euro zone economy could accelerate the speed at which the European Central Bank reduces its borrowing costs. “If there was a significantly faster slowdown in the economy, that would of course have consequences for interest rate policy,” Boris Vujcic told ‘Bloomberg’. “Given where we are now, it probably doesn’t affect the timing of the first reduction, but it could have an effect on the pace.”

The comments come as the eurozone is mired in a period of stagnation and the ECB’s deposit rate still remains at a record low of 4% to ensure rising inflation is contained. “The problems we see in Germany are more of a structural nature than cyclical,” underlines the President of the Croatian central bank while Berlin is struggling to see its economy move forward. “They are linked on the one hand to energy costs, a problem that already existed before the shock in energy prices following the Russian invasion, and, on the other hand, to the transition from “auto industry towards electric vehicles. This should not be confused with the rate cycle.”

If certain governors, like the Greek Yannis Stournaras, have recently more detailed their vision of things, Boris Vujcic remained evasive on the timetable for monetary easing to come: “it would be preferable to have a gradual adjustment of the policy monetary, which means a series of reductions of 25 basis points… At what pace, we will see later.”