BRUSSELS: Philippe Lane, chief economist at the European Central Bank (ECB), says recent euro zone data have strengthened his confidence that inflation is returning to the 2% target, leading to a first interest rate cut in June. He said there was an increased possibility of being killed.
In an interview with Spanish newspaper El Confidential, the Irish official referred to last week's Consumer Prices Report, which revealed pressure in the services sector for the first time since November.
“This was an important first step in the next phase of controlling inflation,” Lane said.
“Preliminary euro zone inflation figures for April and the first quarter gross domestic product (GDP) data both strengthened our confidence that inflation should return to target in a timely manner,” he said. .
“So as of today, my personal confidence level has improved compared to the April meeting. But of course more data will arrive between now and June.”
Although the inflation rate remained at 2.4% last month, basic measures to exclude volatile items such as energy and food continued to decline. Meanwhile, gross domestic product rose 0.3% in the first three months of this year, exceeding economists' expectations.
The data did little to change expectations that ECB officials will lower borrowing costs at their June 6 board meeting for the first time after a series of interest rate hikes. What happens next is less clear, with many observers speculating how a potential delay in US monetary easing will affect the eurozone.
Lane said the ECB would be influenced by the outlook in Europe and said the overall impact of the U.S. Federal Reserve's decisions would be “mostly muted.”
“The impact should not be overstated,” the ECB's chief economist said.
“The U.S. economy and U.S. interest rates affect the euro area in different ways, and essentially these different mechanisms work in opposite directions.”
Mr Lane also said authorities were closely monitoring events in the Middle East and needed to be “very cautious” in their analysis.
“This is a month-to-month assessment, but in the long term we have to accept that we live in a world that faces many geopolitical tensions for many years,” he said. — Bloomberg
