Vujčić offered the strongest rebuttal yet that there could be a serious debate among Governing Council members over the rationale for a jumbo cut. “I saw the Governing Council being on the same page and I don’t really believe that it will be much different in the coming meetings,” he said.
The ECB’s key deposit rate currently stands at 3.25 percent, following three 0.25 percentage points cuts this year.
Vujčić, nonetheless, conceded that things could become more contentious as ECB policy gets more accommodative.
Thus far, most economic data released since the ECB’s last policy decision in October has faithfully tracked the Bank’s official forecasts. The exception, however, has been eurozone inflation, which accelerated in November to 2.3 percent on the year. Vujčić put this down to the impact of high energy prices of the previous years falling out of the calculation.
Addressing services inflation, which remains stubbornly high due to sustained wage growth, Vujčić said he expects the ECB’s new forecasts — which are out next week — to signal a substantial fall for the latter in 2025.
Boosting confidence
A brawl, nonetheless, is brewing within the ECB over how best to steer longer-term policy expectations in uncertain political times. Providing more concrete guidance would, in theory, help to underpin consumer and business confidence. But while doing so is supported by Governing Council members Fabio Panetta and Olli Rehn, not everyone is convinced by the idea.
