Philip Lane, the institution’s chief economist, told CNBC on Tuesday that the European Central Bank’s latest monetary policy intervention was “to complete inflation.”
“We do think the last cycle is done, bringing inflation down from the peak of 10(%), back to 2%, that element is over, but on a forward-looking basis we do need to stand ready to make sure that any deviation we see does not become embedded, does not change the medium-term picture,” Lane said in an interview with CNBC’s Annette Weisbach at the ECB’s annual forum in Sintra, Portugal.
Eurozone Inflation rate Under 1.9% in May was 1.9%, which was below the central bank’s 2% target. It is Meanwhile, the key interest rate has dropped to 2% Starting from its 4% peak last year, money market pricing now shows that by the end of the year, further quarter-point interest rates are expected to rise to 1.75%.
Asked about the meaning of “complete” in the cycle, Ryan said that it means the ECB has managed to clear the price shocks in 2021 and 2022, which stems from the energy crisis and supply chain restrictions in the system. However, he warned that “experienced new shocks” that monetary policy needs to adapt has “new shocks” and that “there may be some periodic movements to be lower.”
Instead of dealing with price shocks, the ECB is now monitoring the transfer of energy markets, a mix of exchange rate and inflation expectations to ensure it does not “overreact” to small deviations in inflation. In supervision, no medium-term changes to the outlook or the “sustainable” factors affecting the domestic economy are ignored.
Risks that tilt to downside
Also in Sintra, Pierre Wunsch, head of the Belgian central bank, told CNBC that inflation and growth risks in the euro zone are now tending to be unfavorable.
“It is generally believed that we are now very close to the (2% inflation of the ECB) target, and this work is mostly done,” Wunsch said on Monday night. He also noted that Europe has seen “relatively slow growth” for two years, but any recovery could be delayed by global uncertainty.
He added: “If we have to go more, it may be cut further. I won’t beg for one person, but I think if there is any discussion, it’s more.”
Wunsch said the ECB will monitor economic data in the coming months to see if euro zone growth improves, especially in production – central banks may need to be “more supportive” if they don’t.
