Philip Lane’s statements on monetary policy
According to the chief economist of the European Central Bank (ECB), Philip Lane, the institution should be able to reduce interest rates to a level that no longer limits the economy by 2025. In an interview with Les Echos, Lane emphasized the importance of a less restrictive monetary policy to promote economic growth and keep inflation
under control.
The future of inflation and economic growth
Lane said that the ECB will not commit to a precise rate of rate reduction, but highlighted the need for a gradual approach. According to him, if monetary policy were to remain tight for too long, the economy would not be able to grow sufficiently and inflation could fall below the 2% target. Lane predicted that much of the work needed to bring inflation back to the target will be completed within the next year, provided there are no new economic shocks
.
Next steps of the ECB and economic data
In view of the next meeting in December, it is expected that the ECB will be able to further reduce financing costs. Recent data on PMI indices have prompted markets to bet on a possible cut in rates by half a percentage point. However, the November inflation data, which will be published shortly, could show an increase beyond the 2% target set by the ECB. Lane noted that inflation is currently close to this target, but is influenced by a combination of lower energy prices and still-high utility inflation
.
Economic recovery in the euro area
Speaking about the euro area economy, Lane described the current situation as a phase of cyclical recovery. He noted that household incomes are improving this year, with wages in several countries growing faster than inflation. There is good reason to believe that consumption will increase significantly in 2025 and 2026, thus contributing to a sustainable economic recovery
.