ECB’s Lane: Need Incoming Data Before Considering Changing Policy Stance

8 February 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Philip Lane on Thursday said that it was necessary to wait for incoming data before considering any changes in the ECB’s monetary policy stance.

Speaking at the Brookings Institution in Washington, Lane said that ‘in order to have any further thinking about the policy position, moving away from the hold position we’ve been in since last September, we need just to have greater confidence in this baseline, and that’s why we’re waiting for the incoming data – on everything, of course.’

Information relevant to the ECB’s assessment included data on the economic recovery, wage deceleration and the extent to which profit margins were absorbing increasing labour costs, he said.

Confidence about reaching the 2% medium-term inflation target was increasing, he said. ‘The baseline is getting back to 2% inflation next year, what we are seeing is broadly in line with that baseline.’

At January's Governing Council meeting, there was a ‘strong consensus’ that it was too early to start thinking about interest rate cuts, he said.

‘Allowing a bit of time to let the data come will be important because there is a range of possibilities, we don’t want to put all of our bets on the baseline… we need some time at this point to wait for the incoming data.’

There had been ‘some deceleration in wages’, but move evidence was necessary, he said.

‘There’s going to be a lot of wage settlements in January, February, March this year, so this why we say we’re waiting to see what the wage data will look like. Our central belief is that there will be deceleration and that’s shared by the surveys we do’, he said. ‘All the indications are we should see it, but we actually need to see some of it in the hard data.’

For the euro area economy to recover properly wage agreements needed to be balanced, he said.

‘[W]e project [the recovery] heavily based on wages rising enough that people can start to increase their consumption. So our forecast needs significant wage increases, but there’s a balance in that, they have to be significant but not so hight that they derail the disinflation process’, he said.