European Central Bank (ECB) Governing Council member Boris Vujcic, speaking in Marrakech, Morocco, cautioned that it might be premature to declare a win over inflation due to the changing economic conditions in the euro-zone. Vujcic underlined the need for patience and highlighted the importance of wage data from early 2024 in understanding consumer prices. He also expressed interest in spring 2024 data for a better grasp of labor-market pressures and wage-growth trends.
This perspective aligns with that of ECB Chief Economist Philip Lane, suggesting that officials may keep their options open despite no anticipated further interest rate hikes as borrowing costs are likely at their peak. The remarks come amid intensifying debates about raising minimum reserve requirements for lenders, which currently stand at 1% of certain liabilities at the ECB.
Vujcic demonstrated a readiness to actively use this tool during periods of excess liquidity generated by unconventional monetary policy. He dismissed concerns over Italy’s escalating borrowing costs under Giorgia Meloni’s government due to its fiscal deficit, asserting it doesn’t necessitate the use of the ECB’s crisis tool designed to manage excessive movements on euro-area bond markets.
The decision to cease remunerating holdings was made in July 2023. Vujcic’s comments indicate a cautious approach by the ECB amid evolving economic conditions, highlighting the importance of future data in shaping policy decisions.
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