The question of when the European Central Bank will start reducing rates is not a major issue, but when the bank starts to take steps then it is possible that it will be done with a small decrease or set a horizontal decision, said Croatian policy maker, Boris Vujcic, on Tuesday.
The ECB last week kept interest rates unchanged but gave an increasingly positive outlook on inflation, boosting market predictions that the bank will start cutting rates earlier than expected.
"April or June does not make much difference for the economy," Vujcic said in a press conference. "I think the more important thing is that we achieve a smooth transition."
Markets see 140 basis points of rate cuts this year and the initial move in April is now almost entirely at stake, despite some opposition from conservatives on the ECB's 26-member Governing Council.
"I think a move of 25 basis points is preferable to a bigger move," said Vujcic, head of Croatia's central bank. One concern is that economic growth is so weak, it could accelerate deflation and price growth could fall below the ECB's 2% target earlier than the bank expects for 2025.
On the other hand, the European Union is seen to have escaped recession last quarter as output stabilized, although it is now in its sixth quarter of generally stable economic performance.
