The European Central Bank can lead to the reduction of inflation without suffering a big blow to the economy, although some uncertainty remains, said the member of the Board of Directors. of the ECB, Boris Vucic.
“If today’s predictions come true, then we will have a smooth landing with a low sacrifice factor, that is, without a recession and a significant increase in unemployment,” Croatia’s central banker said in an interview with Bloomberg.
“We cannot be sure that the development will be this until we reach our goal, but in my view a soft landing remains the baseline scenario“, he added.
Eurozone inflation eased sharply to 2.9% in October, from a high of more than 10% last year, as the ECB made the fastest rate hike in its history.
Uncertainty from the Israel-Hamas war
Central bank officials have warned that returning inflation to the 2% target remains difficult and that the economy is at risk of a shallow recession after contracting 0.1% in the third quarter.
The Israel-Hamas war is a key source of uncertainty as it risks sending energy prices soaring, but the extent of any impact on the Eurozone economy is difficult to assess at present, Vucic said.
“First, it remains to be seen whether or not such a shock will occur. If it does, what will be its nature and extent? And then we will attempt to assess the potential impact on price action and act accordingly,” he noted.
“It is too early to think about rate cuts … However, we should be prepared for the possibility that rates will either rise or fall, depending on the latest data in 2024,” he added.
With information from Bloomberg
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