Boris Vujcic: Key Quotes from Reuters Interview
Economic and Inflation Outlook
* "Economic and inflation developments remain in line with our December baseline, with any deviations being minor. We remain on track, but face a critical period where core inflation must slow significantly."
* "Wage pressures and services inflation are projected to decline, leading to a downward trend in core inflation. This slowdown is essential for maintaining confidence in our projections."
* "Services traditionally undergo price adjustments at the start of the year. We anticipate a less significant increase than last year."
Interest Rates
* "The market expects three additional rate cuts this year. Based on current information and the alignment of inflation with our projections, these expectations are reasonable."
* "However, we are approaching a critical period. To materialize these rate cuts, we must observe a slowdown in core and services inflation. The next three months will provide crucial data in this regard."
Exchange Rate, Pass-Through, and Fed Divergence
* "The exchange rate is a factor we monitor, but at current levels, it does not raise concerns."
* "The pass-through effect may have shifted due to the previous low-inflation environment. We expect pass-through to be higher than in the past two decades."
* "Divergence with the Fed does not pose a financial stability risk at this time. Exchange rate effects are offset by opposing yield dynamics, limiting their impact."
Uncertainty and Trade Tariffs
* "Uncertainty surrounding tariffs has a negative impact on investment decisions."
* "Estimating the impact of tariffs requires detailed information on their exact nature. Until we have that level of clarity, policy responses are limited."
* "The sooner we gain clarity, the better."
Neutral Rate and Policy Communication
* "The neutral rate is a theoretical concept that aids in understanding monetary policy's impact. However, it does not directly drive policymaking."
* "We cannot claim absolute certainty about the neutral rate's location or set a timeline for reaching it."
* "As inflation approaches the target, discussions intensify about the timing of rate reduction pauses. Conversations will also intensify as we approach the point where we can no longer be certain we are in restrictive territory."
* "This could occur at our next meeting, subject to incoming data."
Risks and European Economic Outlook
* "As we approach the inflation target, risks become more balanced. There is a similar risk of overshooting or undershooting."
* "The European economy has experienced stagnation for over a year. Growth remains weak, but I see no significant recession risk."
* "Consumption has underperformed our projections. While conditions for recovery exist (higher real incomes, savings, stable employment), negative sentiment may be a factor."
* "Consumption can quickly accelerate if sentiment improves for several consecutive months."
Labor Market Resilience and Flexibility
* "The labor market has outperformed expectations. Businesses are hoarding labor, learning from the high cost of employee turnover during the pandemic."
* "Companies are implementing more flexible workforce arrangements (reduced hours instead of layoffs) to manage demand fluctuations."
* "This flexibility supports employment levels and confidence."
* "Labor market flexibility has also partially addressed productivity concerns. Productivity per hour worked has improved compared to pre-pandemic levels."