A new member of the European Central Bank's Governing Council has indicated that controlling inflation remains the institution's primary objective, a task that is becoming somewhat easier as oil prices decline.
Ante Zigman, a Governing Council member and Governor of the Croatian National Bank, stated that the ECB has demonstrated its readiness to act by raising borrowing costs. These rate hikes have been implemented despite concerns that they could add to the headwinds facing the region's struggling economy.
In his first public remarks since assuming the role of Croatian central bank governor this month, Zigman told Croatian television, "We have to focus on price stability." He added, "Geopolitical developments related to the opening of the Strait of Hormuz have led to a drop in oil prices. This will certainly have a positive impact on inflation."
As the United States and Iran work towards a lasting peace in the Middle East, the ECB is evaluating whether to raise interest rates further, following an increase earlier this month which was the first since 2023. While the conflict had previously fueled inflation in Europe by driving up energy costs, it also dealt a heavy blow to the economy, which could weaken further if monetary policy tightening continues.
In separate comments, ECB Chief Economist Philip Lane said on Tuesday that inflation would remain above the 2% target for "quite some time." Meanwhile, Vice-President Boris Vujčić noted that both headline and core price pressures are likely to stay at "higher and more persistent" levels.
In an interview published Thursday, Executive Board member Isabel Schnabel told media that, for now, the ECB will need to keep raising interest rates to bring inflation back to target. When asked whether he leans more towards the hawkish or dovish camp within the ECB, Zigman, who succeeded Vujčić, hinted at aligning with the former.
"As an economist who grew up during the hyperinflation period in Croatia, that experience has certainly left a deep mark on me—that one must be vigilant about inflation, one must act in time to prevent it from affecting the most vulnerable groups," he said.
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