ECB’s Lane: ‘Let’s Not Exaggerate the Impact of the Fed on the Euro Area’ After US Election

7 November 2024

By Marta Vilar – ATHENS (Econostream) – European Central Bank Chief Economist Philip Lane said on Thursday that the potential influence of the Federal Reserve’s decisions on the ECB after Donald Trump’s victory in the US presidential election should not be overestimated.

In a panel discussion along with Bank of Greece Governor Yannis Stournaras and former Banco de España Governor Pablo Hernández de Cos at a conference hosted by the Bank of Greece, Lane said that one should ‘not exaggerate the impact of the Fed on the euro area’.

Repercussions of the US elections on the exchange rate would be one of the many elements monitored by the ECB, said Lane.

However, he pointed out, Europe was ‘not a small economy, we are not a dollarised economy’.

Trump’s policies would not impact the European economy solely in ‘one direction’, he observed.

‘There are some calls for easier monetary policy and some for tighter monetary policy. Which force is stronger is a data-dependent issue’, according to Lane.

Stournaras said that US inflation could register a temporary uptick due to Trump’s policies and that this would have negative consequences on the economy, which in turn would affect the exchange rate.

‘Perhaps the EU economy would become weaker, at least in the short term. And that has certain implications on our monetary policy. But unless we have declarations [by Donald Trump], we cannot change our policy’, he said.

Inflation was on a downward path and lower than anticipated by the ECB in its latest projection exercise in September, he said.

Economic growth, however, had surprised positively lately, Stournaras said.

‘The economy was weaker [than anticipated in September] or at least, [that’s what] we thought until some days ago. Things are more optimistic on the economy, we must take this into account’ at the next Governing Council meeting, he said.