(Bloomberg) — European Central Bank Chief Economist Philip Lane said the retreat in consumer-price growth is unlikely to be smooth.
While Lane expressed confidence that inflation is heading back to the 2% target in 2025, he said gains in wage and services costs remain elevated. He reiterated the ECB’s latest policy statement that hints at a cut in interest rates when officials meet in June.
“The current phase of disinflation is necessarily bumpy,” Lane said Monday in a speech in Dublin. “Headline inflation is expected to fluctuate around current levels in the near term on account of base effects in the energy component and the reversal of the upward effect of the early timing of Easter on services inflation in March.”
The ECB last week firmed up plans to lower borrowing costs in June, having left its deposit rate at a record-high 4% for a fifth meeting. Bank of France Governor Francois Villeroy de Galhau has said a move that month will happen, barring a surprise. What happens next is less certain.
Villeroy’s Lithuanian counterpart, Gediminas Simkus, said earlier Monday that more than three cuts are possible this year. But Slovakia’s Peter Kazimir was more cautious, stressing the need for officials to retain flexibility as uncertainty persists.
“We will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction, and we are not pre-committing to a particular rate path,” Lane said. “Wage pressures are gradually moderating but remain elevated compared to a steady-state benchmark.”
–With assistance from Olivia Fletcher.
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