ECB’s Lane: Can’t Drop the Mic on Inflation Yet; Non-Energy Price Must Ease Further

26 November 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Chief Economist Philip Lane said on Wednesday that it was premature to declare victory on inflation, adding that the sustainability of being at target would remain in doubt until non-energy prices also returned to target.

Speaking on Reuters’ Econ World podcast, Lane pointed to the euro area’s “very resilient labor market” and stronger-than-expected economic growth when asked whether the ECB remained in a good position.

“But I think that's a reasonable assessment to say the European economy is growing,” he said. “Inflation is around target, unemployment is low and therefore on any kind of misery index scoring, it's not too bad.”

On tariffs, Lane said their effects should not be expected to appear “in year zero,” noting that some frontloading had taken place before implementation. Still, he downplayed their overall impact, emphasizing that while the US is important, it is “not the dominant factor” for Europe. “For us, it’s the local economy that matters more,” he said.

Most euro area dynamics were domestic, Lane argued, adding that Europe’s economic trajectory would ultimately be shaped by decisions made within Europe.

The impact of US tariffs on Europe was “clearly negative,” he said, whereas AI effects were “clearly positive,” and the weaker dollar had mixed implications. Fiscal policy in the US could also spill over by keeping demand reasonably strong, he noted.

Lane described the European economy as “balanced” in terms of demand and supply, with inflation “more or less around the target,” and said ambitious reforms could lift both supply and demand.

“There are many important challenges facing Europe which would be a lot easier to handle if you grew more quickly,” he said.

Asked whether it was time to declare the ECB’s inflation fight “done,” Lane said inflation was “around the target,” but noted a “split”: non-energy inflation remained at 2.5%, while energy prices had been falling, a pattern he called unsustainable, as energy prices would not decline indefinitely.

“So, we do think there's more work to be done next year in terms of delivering non-energy inflation, getting down to target. And we think it's going to happen,” he said. “But until that happens, there still remain, I think, reasonable questions about the sustainability of being at target.”

Lane said wage growth was still elevated due to ongoing catch-up from the high-inflation period, but that wage dynamics would become more forward-looking next year.

“If I was going to drop a mic [on inflation], it’s not now,” he concluded, suggesting that moment would only come once non-energy inflation reached target sustainably.