The European Central Bank doesn't need to rush cutting interest rates, policymaker Boris Vujcic told Reuters, arguing it will be better for its credibility to be sure that inflation is decisively under control.

Croatia's central bank governor, who joined the ECB's Governing Council last year, also said there could be pauses along the way and that the so-called "equilibrium" rate was probably higher now in Europe than it used to be.

With inflation having swooped swiftly down from 2022's double-digit highs and the euro zone economy in a state of stagnation, financial markets predict as many as five ECB rate cuts this year starting as soon as April.

Vujcic though is in a group of policymakers both in Europe and at the Federal Reserve in the United States to be gently pushing back.

"We need some patience now," Vujcic said in an interview.

"What we've seen in terms of the disinflation so far was good, but we still see also quite a lot of resilience in the services and what we call domestic inflation," he added, also highlighting the ongoing strength of Europe's jobs market.

The coming months will determine when the ECB moves, but having been caught napping in 2022 when the easing of the COVID-19 pandemic and then Russia's invasion of Ukraine sent inflation soaring, Vujcic said it was vital to nail this call.

"It's definitely important to get this one right," he explained. "You've seen the paper by the IMF warning that too many times before central banks have declared victory too early. I don't think we should risk such a mistake."

Vujcic was speaking after a panel debate at Warwick University on Sunday with veteran economist Charles Goodhart, who had warned the current cooling of inflation and calm in world bond markets was only likely to last for another 6-9 months.

Eyewateringly-high debt levels, fast-shrinking working populations, global warming and deglobalisation will all feed inflation going forward, Goodhart argued.

In the shorter term, Goodhart is worried that Donald Trump regaining power in the United States could see the Fed pressured to cut rates quickly, triggering a more serious version of the storm Britain's markets saw in 2022 when then Prime Minister Liz Truss floated mass unfunded government spending.

Responding to those concerns Vujcic said: "We should probably not focus too much on politics before we see what the outcome is and what the economic consequences are".

"What we have seen in the past, however, is that world trade has seen a lot of restrictions being introduced (by Donald Trump) and that the process of globalisation, which had an impact also on the inflation in the past, has to some extent been reversed. And that might also have impact in the future."


Many of those factors feed into a broader issue, Vujcic said, about where the "equilibrium" level of euro zone interest rates now sits in a post-pandemic and more divided world also grappling with climate change.

"I would think that on balance, because you have forces which work in one way or the other direction, it (equilibrium rate) is now higher than it looked like some years ago."

How much higher? "Well we will find out as we move forward," Vujcic said. "People often forget that the world has not changed, the world always changes."

Switching back to speculation of when the ECB should start cutting rates from their record high 4%, he said a month or two either way "doesn't really make that much difference" now a serious recession was unlikely.

Rate cuts will help the euro zone's stagnant economy, but big structural issues like Germany's lagging performance and volatile energy markets still needed to be addressed and central bankers can't do much about that.

"We are likely to achieve our goal in a fashion of a soft landing, which is a success," Vujcic said. "I think we should be content with that".

(Reporting by Marc Jones; Editing by Susan Fenton)