ECB Chief Economist Philip Lane highlighted the importance of maintaining “agility” in monetary policy decisions during a speech today. Lane emphasized that in the current environment of elevated uncertainty, ECB’s “prudent” approach will be guided by a meeting-by-meeting strategy without pre-committing to any specific rate path.
Lane outlined that the pace of monetary easing will depend on the balance of risks. If the inflation outlook or economic momentum experiences upside shocks, “monetary easing can proceed more slowly ” compared to the December projections.
Conversely, in the case of downside shocks, the easing process could accelerate. He further noted that the rate path would also depend on ECB’s “ongoing assessment of underlying inflation dynamics and the strength of monetary policy transmission.”
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