The chief economist of the European Central Bank (ECB), Irishman Philip Lane, declared in an interview with the French newspaper Les Echos that “monetary policy must not remain too restrictive for too long.” In any case, the entity does not commit in advance to a particular speed of adjustment, but repeats that over time it will be necessary to reduce rates, but sends a message that insists on the need to make decisions “meeting by meeting”. ” “.
If the restrictive territory is not abandoned, “the economy will not grow sufficiently and inflation, I believe, will fall below the target”, he warned. The expert said he expects a “rebalancing” of inflation in the coming months with a decline in services. He is convinced that bringing this figure back to the 2% target in a sustainable manner “could actually be achieved next year”. In 2025, “in the absence of new shocks, this balance could be achieved in the sense that a restrictive policy will no longer be necessary”, he insisted.
For the moment, the market excludes that the ECB could be a little more aggressive than expected a few weeks ago, even ignoring that it could carry out a cut of 50 basis points at the next meeting scheduled for December 12.
Despite the message in favor of further rate cuts, in a subsequent speech in London, the central bank’s chief economist said there was a need to remain cautious about the rate cut process, somewhat harming its previous message, noting that “the “. The ECB should “keep an open mind about the pace of rate cuts”, as this is “a valuable strategy in different contexts, as different situations require different approaches”, he emphasizes.
“This careful, step-by-step approach allows us to observe the responses of the economy to our decisions and allows us to continually refine our understanding of the impact of our actions,” Lane explained.
On the other hand, regarding Donald Trump’s policies, the senior European official mentioned that the net effect on the global economy “is clearly negative”, while defending that the euro zone, an economy of continental size, does not trade not exclusively with the United States. States. “We will have to find a balance in our assessment between external pressure on inflation and possibly less internal pressure on inflation,” he explained.
Joachim Nagel calls for caution
Bundesbank President Joachim Nagel also sent a message supporting Lane’s call for caution. For the German, from now on “it is important to be prudent and to relax monetary policy gradually, and without haste”, recalls the ECB hawk. Furthermore, in the same vein as Lane’s speech, he confirmed that the ECB will decide in December, at its last meeting of the year, what the appropriate decision will be, and it will be based on available data and latest news. economic forecasts that the ECB will publish that month to take the decision you deem most appropriate.
