ECB’s Lane: Inflation Outlook “Benign,” 2% Reanchoring “Plausible”

29 September 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Chief Economist Philip Lane said on Monday that an “elegant reanchoring” of inflation toward the ECB’s 2% target was “plausible,” describing the overall outlook as “benign.”

Speaking at the Inflation: Drivers and Dynamics 2025 conference, organised by the ECB, Lane stressed the need to “look underneath the hood,” noting that while non-energy inflation remained above target, further disinflation was expected.

He cited wage moderation, a stronger euro, lower energy prices and weak domestic demand as disinflationary forces.

On the risk of undershooting, Lane said that “assuming monetary policy does its job,” the ECB could plausibly achieve a smooth return to target, helped by well-anchored inflation expectations.

He pointed to solid fundamentals for domestic demand, supported by recent interest rate cuts, fiscal backing, low unemployment and rising real incomes.

“We do have, I think, solid base foundations for domestic demand to keep on growing,” he added.

Lane emphasized that monetary policy must remain properly calibrated to ensure inflation stays around target in the medium term.

“[E]ssentially, it doesn’t look like we are going back to the pre-pandemic equilibrium, very low inflation, but neither does it look like … we have substantial risks of remaining notably above the inflation target,” he said.

That was why, he said, the inflation outlook could currently be regarded as “reasonably benign.”