ECB Chief Economist Philip Lane said in a speech today that the recent 25bps rate cut was necessary to prevent temporary inflation undershoots from becoming persistent. Speaking about the June policy decision, Lane emphasized the influence of falling energy prices, a stronger Euro, and a deteriorating materially changed outlook on ECB’s latest projections.
He also highlighted growing uncertainty over the international trade system, citing risks that extend beyond tariffs to include new non-tariff barriers, shifts in investment frameworks, and increased convergence between economic and national security policies.
Against this backdrop, Lane reaffirmed the ECB’s “meeting-by-meeting”. He stressed that “data dependence also extends to the incoming data on policy settings outside the monetary domain”, since shifts in international and domestic policy regimes are highly relevant for future inflation dynamics.
