ECB Chief Economist Philip Lane, in an interview with German newspaper Die Zeit, emphasized the necessity for further interest rate hikes to ensure that inflation returns to the 2% target. Lane stated, “Under our baseline scenario, in order to make sure inflation comes down to 2%, more hikes will be needed.”
He also suggested that even in cases of limited financial stress, interest rates would still need to rise. “If the financial stress we see is non-zero, but turns out to be still fairly limited, interest rates will still need to go up,” he said.
Meanwhjile, Lane expressed optimism about moderating price pressures at earlier stages of production, which are expected to eventually impact consumer prices. “If you look at the earlier stages of production, at the farm gate prices, at the prices of the food ingredients, you will recognize: all of these have turned around,” he said.
The chief economist also dismissed the notion that a recession is required to bring inflation down, asserting that a soft landing for the economy is possible. Lane believes that the pandemic recovery can continue alongside decreasing inflation, as he noted, “We’ve lost so much growth momentum in the pandemic that it’s possible for the pandemic recovery to continue and for inflation to come down simultaneously.”
