European Central Bank chief economist Philip Lane said he doesn’t see any major risks to inflation in either direction, suggesting he and his colleagues may be happy to leave interest rates where they are for the time being.
“It doesn’t look like we’re going back to the pre-pandemic equilibrium of very low inflation,” Lane told a panel discussion Monday in Frankfurt. But neither does it appear that there are “substantial risks of remaining noticeably above the inflation target either.”
Comfortable with the growth of consumer prices, the ECB left borrowing costs at 2% for a second meeting this month and is expected to do so again in October. Investors and economists no longer predict cuts beyond the eight already enacted this cycle.
“We do have this assessment of the inflation outlook which is reasonably benign at this point,” Lane said.
He argued that a convergence toward 2% instead of a plunge below is “plausible” due to robust demand. A recovery in real wages is stoking consumption while interest rate-sensitive sectors are only starting to respond to lower borrowing costs and there’s more fiscal support than normal, Lane said.
Source: theedgemalaysia