ECB Chief Economist Philip Lane revealed in an interview with French newspaper Le Monde that the central bank will likely raise interest rates again at their May 4 meeting, stating, “This is still not the right time to stop.” While Lane did not specify the rate hike’s magnitude, he said that “it would be inappropriate to leave our deposit rate at the current level of 3%.”

Lane acknowledged the decline in Eurozone inflation from 10.6% last October to 6.9% in March as a positive development, easing pressure on living costs. He expects inflation to continue falling due to supply chain bottleneck improvements and the reversal of the energy situation. However, Lane stressed that the most crucial aspect for central banks is “making sure that we get close to our target of 2% within a reasonable time period.”

Lane does not believe the current situation resembles the 1970s-style persistent inflation, but he cautioned against the risk of ending up in such a scenario. Lane underlined the importance of ECB raising interest rates to ensure a “timely” return to the 2% inflation target. Regarding the European economy, he noted that while it is not stagnant, it follows a more modest path than expected prior to the pandemic and the Russian war against Ukraine.

Full interview of ECB Lane here.

BoJ BOJ Governor Kazuo Ueda addressed parliament today, emphasizing, “In light of current economic, price and financial developments, it’s appropriate to maintain monetary easing, now conducted through yield curve control.”

Ueda reiterated the importance of keeping Japan’s monetary policy loose to achieve the 2% inflation target in a sustainable and stable manner, along with wage hikes. He added that if wage growth and inflation accelerate faster than expected and require tightening monetary policy, BoJ is prepared to respond by raising interest rates.

Despite this, Ueda warned of the risk of inflation falling further below expectations, calling it “very worrying.” He noted that “the risk of inflation undershooting forecasts is bigger than the risk of overshooting,” emphasizing the need to maintain the BoJ ‘s massive stimulus for the time being.

ECB Governing Council member Gabriel Makhlouf stated in a blog post that it is too early to plan for a pause in tightening of monetary policy, emphasizing the need to focus on incoming data. In a blog post, Makhlouf said, “on the evidence so far, it is too early to start planning for a pause in our tightening of policy.” He further noted that based on current evidence, restrictive rate levels are necessary to balance supply and demand in the economy and reduce inflation.

In separate occasion, another Governing Council member François Villeroy de Galhau emphasized the role of climate change in affecting price stability and economic activity. He highlighted that addressing climate change is not an instance of mission creep or politicization, but rather a core duty of central banks worldwide. Villeroy stated, “It’s not mission creep, it’s not a politicisation of our mandate – it is our core business and core duty.”

ECB Executive Board member Isabel Schnabel said in a Politico interview that additional rate hikes are necessary, with the size of these hikes depending on incoming data. “The data we have so far shows that inflation is higher and the economy more resilient than projected,” she added that “data dependence means that 50 basis points are not off the table” for May meeting.

She also noted that “it’s far too early to declare victory on inflation.” She explained that if core inflation remains high and persistent, even if it reaches a peak, the information content of that data point might be limited. “So what we really need is confidence that it’s actually coming down in a sustained manner.”

Schnabel acknowledged that she cannot predict the terminal interest rate, noting that rates must be set on a meeting-to-meeting basis. She also addressed concerns about a potential recession, stating, “So far, there are no particular signs of a weakening in economic developments. At this point in time, I have no reason to believe that a recession is coming.”