ECB needs to keep economy in check – Lane

Eurozone wage growth is expected to slow next year, but persistent inflationary pressures will prompt the European Central Bank (ECB) to maintain a restrictive monetary stance, said ECB chief economist Philip Lane on Tuesday.

Despite the ECB’s recent rate cut, its first since 2019, Lane indicated no promise for further cuts, echoing ECB President Christine Lagarde’s sentiment that it may be the initial step in a series of reductions.

Lane emphasised that ongoing high uncertainty and elevated price pressures, reflected in domestic inflation, service inflation, and wage growth indicators, necessitate a tight monetary policy.

The ECB remains cautious about any additional policy easing, with future decisions dependent on incoming data and made on a meeting-by-meeting basis.

Market expectations currently predict only one more rate cut for the second half of the year, with between three and four potential cuts over the next 18 months.

Despite some improvement in economic growth, sectors sensitive to interest rates continue to show subdued demand, posing little risk of escalating inflation pressures.

Attribution: Reuters.