ECB Chief Economist Philip Lane said in an interview, “our assessment of December remains solid, that we needed a sequence of 50 basis point hikes to bring us inside a zone where we would need to think harder about whether rates are sufficiently restrictive to deliver the return of inflation to 2%.
“The data flow since then suggests that the assessment is solid, that we need another 50 basis points in March,” he said.
Beyond March, “the overall philosophy is that we will bring rates to a level that is sufficiently restrictive, which depends on where the inflation forecast is, where we are with underlying inflation and where we are with the monetary transmission mechanism.”
“There is a zone of interest rate paths that the Governing Council will have to assess in March, in May and thereafter, and determine where in that zone we want to be,” he added.
Without commenting on whether rate will stay at a significantly long plateau, Lane said “I absolutely sign up to the monetary policy philosophy that wherever we get to, we should be slow to come down until we have very strong evidence – not just in the forecast but also in our ongoing assessment of underlying inflation – that we are returning inflation to target.”
