European Central Bank Should Focus on Future Risks, Not Latest Data: Chief Economist
Philip Lane, the chief economist at the European Central Bank (ECB), has emphasized that the institution should base its future monetary policy decisions on upcoming risks rather than the latest economic data. In a recent interview with the Financial Times, Lane highlighted the need for the bank to focus on potential shocks that could lead to changes in inflation pressure once the current disinflation process is complete.
According to Lane, there is still “a little bit of distance to go” for the overall inflation rate to reach the ECB’s target of 2%, with services inflation needing to slow down further. This sentiment is supported by recent Eurostat data, which showed that euro zone inflation accelerated to 2.3% in November, exceeding October’s 2.0% rate.
Lane believes that once the disinflation process is completed, the ECB should transition from addressing the current challenge to maintaining inflation at 2% on a sustainable basis. His comments were made before the latest Eurostat data was published, and he reiterated the need for a more cautious approach to interest rate cuts, which could continue at future meetings.
Investors have been betting on a steady stream of rate cuts and policy easing until next June, with the ECB having cut interest rates three times this year. The bank’s focus on upcoming risks rather than latest data may have significant implications for its policy decisions in the months to come.