HomeLive CommentsECB Lane: Important for optionality to be two-sided

ECB Lane: Important for optionality to be two-sided

ECB Chief Economist Philip Lane said in a speech, “the Governing Council sees it as increasingly likely that inflation will stabilise at our two per cent target over the medium term”. Under this pathway, ‘the degree of monetary policy stimulus put in place to address the pre-pandemic challenge of persistent below-target inflation can be normalised in a gradual fashion towards a more neutral setting.”

“In current conditions, it is especially important to remain data-dependent and for optionality to be two-sided,” he said. “On the one side, we should ensure that our policy settings are adjusted if de-anchored inflation expectations, an intensification in catch-up wage dynamics or a persistent deterioration in supply capacity threaten to keep inflation above target in the medium term.”

“On the other side, we should also be fully prepared to appropriately revise our monetary policy settings if the energy price shock and the Russia-Ukraine war were to result in a significant deterioration in macroeconomic prospects and thereby weaken the medium-term inflation outlook.”

Full speech here.

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