In an interview with the Financial Times, ECB Chief Economist Philip Lane indicated that, barring major surprises, there is sufficient evidence to “remove the top level of restriction” in June, suggesting an initial reduction in the 4.00% deposit rate. He noted that the forthcoming data over the next few months will guide ECB in determining the pace at which further restrictiveness can be eased.
Lane acknowledged that the path to disinflation will be “bumpy and gradual.” He framed the debate for this year by stating that ECB still “needs to be restrictive all year long,” but within this “zone of restrictiveness,” there is potential to “move down somewhat.”
He added, “We don’t need the data to say normalization is a lock. What we do need the data to say is: is it proportional, is it safe, within the restrictive zone to move down.”
Looking ahead to next year, Lane mentioned that discussions about the “normalization” of monetary policy will be more pertinent when wage growth has visibly decelerated and the inflationary impacts of current fiscal measures have diminished.
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