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ECB's Philip lane sees inflation slowing significantly later this year

While price pressures won't hit the ECB's goal until sometime in 2025, the recent decline in energy will reduce costs across the economy before long, he said in a podcast produced by the central bank

European Central Bank Chief Economist Philip Lane. (Photo: Bloomberg)

European Central Bank Chief Economist Philip Lane. (Photo: Bloomberg)

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By Jana Randow

European Central Bank Chief Economist Philip Lane is confident that inflation in the 20-nation euro zone will retreat markedly in the coming months, adding to evidence that interest rates are close to their peak.
 
While price pressures won’t hit the ECB’s goal until sometime in 2025, the recent decline in energy will reduce costs across the economy before long, he said in a podcast produced by the central bank.

“What we have in our projections is inflation should come down quite a lot later this year, but getting all the way back to our 2% target it’s essentially scheduled more or less for 2025,” he said. “The very rapid fall in energy prices — we are confident — will bring down costs across the economy.”
 

Easing supply bottlenecks will also lower inflation over time, he said. At the same time, “the domestic component of inflation coming from rising wages and also firms looking to rebuild profits is pushing up underlying inflation.”

“So there’s forces working in opposite directions and this is why we are very data dependent as we go into the autumn,” Lane said. “We will be hunting for clues.”

The ECB lifted borrowing costs for the ninth time last week, taking the deposit rate to 3.75%. Policymakers haven’t committed to another step in September, with President Christine Lagarde saying the choice is between another hike or a pause.

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First Published: Aug 04 2023 | 5:01 PM IST

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