(Bloomberg) -- The European Central Bank can lower interest rates before the Federal Reserve does likewise, but a prolonged deviation in monetary policy would have consequences, according to Governing Council member Boris Vujcic.

“The longer a possible gap between us and the Fed widens, the more impact it is likely to have,” the Croatian official said Thursday in an interview. “We can, of course, move first, given the differences between the two economies,” but “we will then have to carefully assess the impact as we move along.”

He sees possible lessons for Europe from elevated US consumer-price gains, saying that while country-specific reasons like strong economic growth and fiscal support are partly to blame, there are other factors that are “more common.”

The delay in Fed easing is proving a major topic for discussion among ECB officials plotting a first cut in borrowing costs at their June meeting. With some policymakers urging as many as four reductions for the euro zone this year, the prospect of the euro weakening to parity with the dollar is being raised — a shift that could boost inflation by increasing the cost of dollar-denominated commodities. 

Vujcic also said:

  • “The disinflation in the euro area might come to a virtual standstill around the middle of the year. Positive base effects are running out and services inflation is sticky. With the positive momentum in services component of inflation, which is a major part of the CPI basket, it’s hard to see where more disinflation would come from by the end of the year”
  • “The situation could become even more difficult if oil prices rise significantly, due to heightened geopolitical risks. If it is a short-lived shock, fine. But if energy prices stay high for a prolonged period of time it will trickle through into overall prices and the economy”
  • “This all calls for caution and prudence in cutting interest rates. I would favor cautious 25 basis-point cuts as long as inflation doesn’t surprise to the downside significantly, or the economy weakens substantially.”
  • “All options are open and we can’t pre-commit. The data will tell us what we have to do”

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