ECB aims for balanced rate cuts in 2025 – Lane

The European Central Bank (ECB) is poised to ease monetary policy further this year but must tread carefully to avoid a recession while ensuring inflation stays on target, ECB chief economist Philip Lane told Austrian newspaper Der Standard on Monday.

Lane emphasised the importance of striking a middle ground, cautioning that overly rapid interest rate cuts could make controlling services inflation difficult, while keeping rates too high for too long risks pushing inflation below the ECB’s 2 per cent target.

The ECB, which lowered interest rates four times in 2024, is expected to implement another four cuts in 2025, primarily in the first half of the year.

Services inflation, stuck at around 4 per cent last year, remains a key challenge, although Lane expects easing wage growth to help bring inflation down further from December’s 2.4 per cent.

Lane downplayed the likelihood of a recession, noting that economic growth has hovered just above zero and that current conditions are favourable for continued disinflation without significant economic contraction.

“What we will have to work out this year is the middle path of being neither too aggressive nor too cautious in our actions,” Lane said, underscoring the ECB’s commitment to steady, balanced action.

Attribution: Reuters

Subediting: Y.Yasser