ECB’s Lane: Disinflation ‘Not Quite Done’, Services Going to Come Down

23 May 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Chief Economist Philip Lane said on Friday that the disinflation process was ‘not quite done’ and that services inflation still had to decline further.

In a speech and Q&A session at EMU Lab in Florence, Italy, Lane said that services inflation ‘went up fairly quickly and it is remaining roughly high.’

‘Now we think, forward-looking, it is going to come down’, he said.

Lane cited the debate in the market about the ECB’s terminal rate and the bets that it could go below 2%.

‘There is a debate about maybe we go below 2% in the near term, but not for very long, so the steady state is expected to be around 2%’, he said.

Eurozone inflation could not be mechanically linked to US inflation, according to Lane, who said that the Federal Reserve’s monetary policy impact on Europe was felt mainly in the medium term.

‘So, if the Fed tightens policy over a couple of years it lowers inflation in Europe’, he said. ‘In the medium term it may not, because … the euro may weaken and raise inflation, but we think the bigger effect is that … the world economy slows down, and that weakens European export demand around the world, it lowers commodity prices.’

However, Lane stressed that European inflation was under the ECB’s control and therefore the ‘global inflation concept’ would be inaccurate.