July Rate Hike ‘Reasonable’, but Too Soon To Talk About September, ECB’s Lane Says
28 June 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Executive Board member Philip Lane said on Wednesday that a rate hike in July was reasonable, but that it would be important to look at data before deciding what to do in September.
In an interview with CNBC, he said that the ECB still had a long way to go before inflation returned to its 2% target, which would take a couple of years and require a period of restrictive policy rates.
‘We are close enough to the July meeting that it is reasonable to say that barring a material change in the outlook that another hike looks reasonable for July’, he said, adding that ‘I’m not even thinking too hard about September, there are so many data points that will come to us between now and September.’
The Eurozone would not see inflation rates go ‘back towards 2% for a couple of years’, he said. He predicted ‘good progress even this year, especially the later part of the year’, but inflation was ‘not going to collapse to 2% within a few months.’
‘And so we will have a sustained period where rates need to remain restrictive, to make sure we don't have any new shock that takes us away from 2%’, he added.
‘In order to make sure it doesn't take too long. And in order to make sure it doesn't become embedded indefinitely. This is why we say we need to move monetary policy to sufficiently restrictive levels for sufficiently long’, he said.
Markets should not expect rate cuts from the ECB anytime soon, he said: ‘When I look at the horizon for the next couple of years, I don't see rapid rate cuts priced in. I don't think it's appropriate to have rapid rate cuts priced in.’