ECB’s Lane: Not pre-committing to a particular rate path

In a speech today, ECB Chief Economist Philip Lane noted that the central bank’s baseline projections reflect the market yield curve and anticipate “a set of rate cuts” in 2024 and 2025. He noted that with a clearly restrictive deposit facility rate of 3.75%, ECB could address potential “upside shocks to inflation” by adopting a “slower pace of rate reductions.” Conversely, maintaining a policy rate of 3.75% offers “more protection against downside shocks” compared to staying at 4.0%.

Lane emphasized the high level of uncertainty and the persistent price pressures reflected in domestic inflation, services inflation, and wage growth indicators. These factors necessitate a continued restrictive monetary stance, with decisions being made on a data-dependent, meeting-by-meeting basis.

He reaffirmed ECB’s commitment to ensuring that inflation returns to the 2% medium-term target “in a timely manner” and stressed that policy rates will remain “sufficiently restrictive” for as long as necessary to achieve this goal.

Lane emphasized that ECB is “not pre-committing to a particular rate path” and will continue to assess the appropriate level and duration of restriction at each meeting.

Full speech of ECB’s Lane here.