ECB/Lane: Effects of separation with Fed should not be exaggerated
European Central Bank Chief Economist Philip Lane said that the impact of a possible divergence with the Fed on monetary policy should not be “exaggerated”. Lane stated that he is confident that inflation has returned to its target. This view supports the interest rate cut expectation in June.
European Central Bank Chief Economist Philip Lane is confident that inflation is back on target. Speaking to the Spanish newspaper El Confidencial, Lane referred to the inflation data announced last week, which showed the first slowdown in the service sector since November, and said, “This was an important step in the slowdown in inflation. Eurozone April inflation and first quarter growth data indicate that inflation will return to the target over time.” “It increased my confidence, but we will see more data by June,” he said.
Eurozone inflation was 2.4 percent in April, and the economy grew by 0.3 percent in the first quarter of the year, above economist expectations.
The ECB is expected to cut interest rates at its meeting on June 6. Many economists point out the possibility of the USA postponing interest rate cuts and have the opinion that this development will affect the Eurozone.
Stating that they will make decisions depending on the economic outlook, Lane stated that the effects of the Fed’s decisions will be ‘largely contained’. Lane said, “We should not exaggerate the effects of divergence. The US economy and US interest rates affect the Eurozone in different ways. In particular, different mechanisms work in opposite directions.” he said.
Lane said that they are following the developments in the Middle East closely and that they “need to be very careful” in their analysis.