Interview with Philip R. Lane, member of the Executive Board of the ECB, conducted by Marcel de Boer, Marijn Jongsma and Joost van Kuppeveld

16 October 2023

Why did it take the ECB so long to raise interest rates? The Federal Reserve started several months earlier.

First, in 2021 demand was playing a much bigger role in driving US inflation, so the role for monetary policy was immediate. Second, the ECB did not cut interest rates during the pandemic, as the Fed and BoE have done. So the first rate increases by other central banks were reversing the pandemic cuts. We did do a lot of QE (large-scale asset puchases, Ed.) and then the targeted lending. So our first job in December 2021 was to roll back QE and in July 2022 we raised rates for the first time. Now, would increasing rates a little earlier, say in March, have meant that inflation would have been visibly lower in 2022? I don’t think so. But the path to an interest rate of 4% would have been more gradual. But moving three…