www.ecb.europa.eu
Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Federico Fubini
13 January 2024
The rate hike in September was meant to increase confidence that the ECB would achieve its inflation target, so it was like taking out extra insurance, in a way. In light of recent, more encouraging data, is that extra insurance still warranted or can it be rolled back?
The first point to make is that there has been progress on inflation in recent months. It is hard to be exact about the role of individual hikes, but of course the September interest rate hike has helped with that. By underlining that the ECB will maintain a restrictive policy, it has helped cool down inflation expectations and moderate price setting in the autumn.
Second, once the ECB begins lowering interest rates, this would not be by a single decision of a rate cut, there would most likely be a sequence of rate cuts. The September hike means the peak rate has been higher than it otherwise would…