We are in a zone of normal central banking

In an interview with Germany’s Frankfurter Allgemeine, Philip Lane, the chief economist of the European Central Bank (ECB), indicated that although the majority of factors suggested a continued decline in euro area inflation, there were also concerns, such as the possibility of unsuccessful European Union (EU)-US trade negotiations, that could lead to an increase in inflation.

Key Quotes

• ECB’s task to bring inflation back to 2% is mostly completed.
• Services inflation is still too high. Inflation is to remain close to 2% in the coming months.
• The impact of tariffs may influence medium-term inflation.
• No one is talking about dramatic rate cuts. We are in a zone of normal central banking.
• We won’t return to low pre-COVID inflation rates.
• Some spillover effects from high US rates in the medium term.
• We need to look at the impact of exchange-rate shifts.