Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted on Friday, 24 February 2023 by Balázs Korányi and Frank Siebelt

28 February 2023

What is your assessment of economic developments since your last meeting or since the December projections?

Since the December meeting – that is the relevant timeline for us – we’ve experienced several favourable supply shocks.

There’s been a strong decline in energy prices, particularly for gas. This is a partial reversal of the stagflationary shock we had last year. Such a supply shock is better for GDP and should also lower the inflation rate. So it’s a good news story.

Then we’ve seen confirmation that the bottlenecks continue to ease. That’s probably most visible in the rebound in car industry production in recent months. That’s significant for the European economy. The easing of bottlenecks is also good news for GDP and for pricing pressures.

On top of that, we have the reopening of China, which I interpret as a favourable supply shock, as Chinese firms are now back looking to compete on the global market. We also have fewer concerns about pandemic restrictions in China creating new bottlenecks. But of course there’s also an impact on the demand side, because China is set to grow quickly this year. This reopening will boost global demand for commodities and foreign demand for the euro area.

Another favourable demand shock is the labour market. We continue to have good news about the…