Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Jennifer Schonberger

22 September 2023

You opted to raise rates for the tenth time last week, bringing rates to an all-time high of 4 per cent in the eurozone. Inflation is still stuck above 5 per cent. Yet you seem to have signalled that you are finished raising rates. Why? Could you explain?

Well, I think the way to think about it is we think inflation will come down from low fives in August to low threes by the end of this year. So last autumn was really the peak of intense inflation pressure. We had very strong gas price increases last year, which peaked in August 2022. And essentially this autumn, there will be base effects where that 5 per cent inflation rate comes down into the threes. So the 4 per cent interest rate is there to bring inflation from around 3 per cent at the end of this year back to 2 per cent in 2025. That’s the scale of the underlying inflation challenge. And this is why…