ECB’s Lane: Not Seeing ‘Dramatic Weakening’ of Euro Area Economy

23 October 2024

By David Barwick – WASHINGTON (Econostream) – European Central Bank Executive Board member Philip Lane on Wednesday said that disinflation was proceeding well and that the euro area economy was not experiencing a ‘dramatic weakening’.

In an on-stage conversation at the IIF annual membership meeting, Lane said that the ECB had a ‘vision for the next year or two of disinflation continuing’ and characterised disinflation as ‘well on track’.

At the same time, joblessness was seen remaining low, he said.

‘Some of the recent data raise some questions’ about the scenario calling for a recovery of activity, he noted, but ‘we still find this narrative of a good recovery in the economy as a very plausible baseline.’

The euro area was not seeing ‘some sort of dramatic weakening of the economy’, he said. ‘We’re not seeing that.’

Labour hoarding by companies in anticipation of a recovery meant weak productivity in the short run, he said.

‘If our baseline pans out, we expect to see fairly decent productivity growth’, he said.

In setting monetary policy, the ECB would stick to its ‘very data-dependent approach’ without pre-committing to any particular rate path, he said. ‘It’s the traditional focus on the inflation outlook’, including underlying measures, he said.

‘I think the overriding commitment is that we’ll be agile’ and respond in a ‘risk-adjusted way’, he said.

The r* discussion was ‘a pretty mature debate now’, he said. ‘I think we’re comfortable in concluding that we’re still north of this zone. But clearly as we move toward this zone, this debate will become much more prominent.’

Were all the policy recommendations for better investment to be implemented, ‘we could have a pretty big surge of investment in Europe’, Lane said.