ECB’s Lane: Hard to Have Strong Wage Inflation Under Current Circumstances

22 June 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Executive Board member Philip Lane on Tuesday dismissed robust wage developments as unlikely in an environment of weak job markets.

Speaking at a virtual event of Athens University of Economics and Business, Lane said that inflation was presently ‘overwhelmed by transitory forces’. Much of ‘high inflation this year to some extent is just cancelling out low inflation last year, and if you average out the two years’, the result is just some 1%, he said.

To be sure, he said, there was an ongoing debate about global commodity prices. ‘Let’s see’, he said. ‘Right now we have unemployment … around 15%, so it’s very difficult to have really strong wage inflation when the labour market is in that condition.’

Over time inflation would go up, but of a supposed new inflation paradigm, he said: ‘I don’t really buy into that.’

Asked about Target 2, he replied: ‘Let’s be clear here: it’s fundamental to our monetary union that we have a unified liquidity system … If we have a monetary union, we will have some version of a Target 2 system.’