ECB Chief Economist Philip Lane noted during an event today that services inflation will “come down quite a bit” in the coming months. He attributed much of the anticipated moderation to a slowdown in wage growth. Additionally, firms are reportedly experiencing reduced cost pressures, which should also contribute to easing price increases.

Lane highlighted the challenges of providing a definitive future path for interest rates, citing significant uncertainties in the global economic environment, including escalating trade tensions.

“From our point of view, saying here’s where we think the future rate path is going to be conveys a sense of certainty that we don’t feel,” Lane said, reinforcing the ECB’s cautious stance.

On the topic of exchange rates and their influence on prices, Lane pointed out that while movements in the euro-dollar exchange rate can impact European prices over time, the short-term relationship is less predictable. He noted that in the early stages of a significant currency shift, much of the impact is “absorbed by firms.

“The exchange rate, I think, over time plays a role,” Lane said. “But in terms of the month-by-month, quarter-by-quarter correlation between the exchange rate and import prices is not that stable.”

Croatian ECB Governing Council member Boris Vujcic emphasized a cautious and deliberate approach to monetary policy adjustments during comments to Econostream Media.

Vujcic stated that any acceleration in the pace of rate cuts would require a “significant departure” from the current economic projections, which he noted were being met by ongoing developments.

“In circumstances where uncertainties are still elevated,” Vujcic explained, “it’s better to move gradually, and this is what we’re doing.”

Vujcic also highlighted the ECB’s independence from other central banks, including the Fed. “We are not dependent on the Fed or any other central bank,” he remarked.

His comments lent support to current market expectations for ECB’s policy path, which he described as “justified” in the near term.

Finnish ECB Governing Council member Olli Rehn reaffirmed the central bank’s commitment to easing monetary policy as disinflation remains on track and the region faces a weakening growth outlook. Speaking with Bloomberg TV, Rehn stated that it “makes sense to continue rate cuts.”

Rehn projected that ECB is likely to exit restrictive monetary territory “sometime in the spring-winter,” a timeline he clarified could range from January to June in Finland’s seasonal context.

He added, “I would say at the latest by midsummer, we should have left restrictive territory.”

Rehn also emphasized ECB’s independence in policy decisions, distancing it from the Fed’s approach.

“The ECB is not the 13th federal district of the Federal Reserve System,” he noted, reinforcing that the bank’s decisions are guided solely by its mandate to maintain price stability within the Eurozone.

ECB Chief Economist Philip Lane, in an interview with Der Standard, highlighted that a “middle path” is essential to achieving the inflation target without stifling economic growth or allowing inflationary pressures to persist.

Lane warned that if interest rates fall too quickly, it could undermine efforts to bring services inflation under control. On the other hand, keeping rates too high for too long risks that inflation could “materially fall below target”.

“We think inflation pressure will continue to ease this year,” Lane stated, while adding that wage increases in 2025 are expected to moderate significantly, which could contribute to a softer inflationary environment.

While acknowledging that the overall direction of monetary policy is clear, Lane underlined the complexities of striking the right balance of “being neither too aggressive nor too cautious.”

Full interview of ECB’s Lane here.