ECB’s Lane: Convergence to Inflation Target to Determine Rate Path

11 March 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Philip Lane on Monday said that the next steps regarding interest rates would be determined by the success in achieving price stability.

In a blog post on the website of the ECB, Lane said, ‘Looking to the next phase of monetary policy, ensuring the convergence of inflation to the target on a sustainable basis will determine the future path of policy rates.’

Three sources of uncertainty needed to be considered when reviewing the 2021-2022 ECB’s monetary policy decisions, he said in the almost entirely backward-looking article, namely regarding the nature and the propagation of inflation shocks, and the transmission of monetary policy.

‘Since there is an array of interdependencies across these different types of uncertainties, a wide range of scenarios can be examined and the design of optimal monetary policy also has to incorporate the variation over time in these risk factors, especially taking into account data-dependent learning from meeting to meeting’, he said.

It was necessary to consider the complete yield curve in the transmission of monetary policy, he said, noting that ‘anticipations of future rate decisions playing a key role in addition to the current rate setting.’

‘For this reason, minor variations in the timing of rate decisions are unlikely to materially affect inflation outcomes’, he concluded.