ECB’s Lane: Increased Confidence About Reaching the Inflation Target
6 May 2024
By Aurėja Bobelytė – VILNIUS (Econostream) – European Central Bank Executive Board member Philip Lane on Tuesday said that his confidence about achieving price stability in a timely manner had improved after looking at new data and estimates.
In an interview with the Spanish newspaper El Confidencial, Lane said that it would be appropriate for the ECB to reduce interest rates once there was enough confidence about the return to the inflation target and added, ‘Both the April flash estimate for euro area inflation and the Q1 GDP number that came out improve my confidence that inflation should return to target in a timely manner.’
‘So, as of today, my personal confidence level has improved compared with our April meeting. But of course, more data will arrive between now and June’, he said.
April data showed an improvement in services inflation, which fell to 3.7% after five months at 4%, he noted, adding that a decline in services inflation had been expected and was an ‘important initial step in the next phase of bringing inflation down.’
‘The focus now is on making sure that services inflation does not derail the return of overall inflation to our 2% target’, he said.
Even though April data had provided more confidence, the ECB would continue to closely monitor new data in order to calibrate its monetary policy stance, he said.
‘Last week’s numbers were a big part of the information we were waiting to see. But we will have another month of inflation data when we meet in June. And we will also have more information on wage dynamics’, he said. ‘Let’s use those weeks to look at the incoming data.’
High interest rates held back investments, which over time would be harmful to the European economy, he said.
‘There is a cost to high interest rates and we should only pay that cost so long as we have excessive inflation risk’, he said. ‘As inflation risk comes down, the current level of interest rates should not be sustained indefinitely.’