By Marta Vilar – MADRID (Econostream) – European Central Bank Chief Economist Philip Lane said on Tuesday that in order to take further steps the ECB had to consider various factors. 

In a speech at the Barclays-CEPR Monetary Policy Forum 2025, Lane said, ‘Looking ahead, our monetary policy will have to take into account not only the most likely path (the baseline) but also the risks to activity and inflation.’  

The ECB had to assess how different interest rate paths performed under a range of plausible scenarios and sensitivity tests in order to avoid prolonged deviations from the 2% inflation target, he said. 

Despite describing the return to target as a ‘largely completed’ challenge, Lane said that ‘services inflation still has some distance to travel to make sure that inflation stabilises at the target on a sustainable basis.’ 

However, he pointed to ‘accumulating evidence’ suggesting that the long-awaited disinflation in services was now starting to take shape. 

‘[F]irst, the projection errors for inflation, including for the services subcomponent, have been relatively small during the disinflation process; second, both the wage tracker data and survey indicators suggest that further deceleration in wage growth can be expected in both 2025 and 2026, facilitating further declines in services inflation’, he said. 

Trade policy, the Ukraine war and the Middle East conflict were ‘a major source of uncertainty’, he said. 

‘Reflecting these developments, we have seen high volatility in energy prices this year and substantial currency repricing’, he said. ‘There has also been considerable financial market volatility.’ 

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