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Eurozone chief economist Philip Lane warned that inflation in the eurozone could fall below the European Central Bank's target of 2 percent if policymakers do not continue to cut interest rates.
in interview In the Austrian daily Der Standard published on Monday, Lane said that too low inflation rather than too much inflation was now a risk that interest rate setters should take into account.
Borrowing costs should not remain “too high for too long” because growth could be so weak that “inflation could fall meaningfully below target,” Lane said. He stressed that such high rates Economic inflation“This is also undesirable.”
Lane's comments highlight the growing transatlantic gap in monetary policy as the Fed turns to a more hawkish tone after… The inflation rate in the United States rose Strong job growth exceeded expectations.
Investors expect that European Central Bank The bank will continue to make quarter-point cuts until borrowing costs reach about 2 percent, after policymakers cut the benchmark deposit rate in four steps from 4 to 3 percent since June.
Euro zone bond yields rose on Monday to multi-month highs after strong US jobs data on Friday, reflecting expectations of higher global borrowing costs. The yield on German 10-year bonds rose 3 basis points to 2.6 percent, the highest level since July.
Olli Rehn, governor of Finland's central bank and a member of the ECB's governing council, told Bloomberg TV that further interest rate cuts in the euro zone are necessary regardless of the Fed's moves.
“(The European Central Bank) is not the 13th federal district of the Federal Reserve System. We make decisions based on our mandate, which is price stability in the euro area,” he said in an interview in Hong Kong.
Lane said the ECB needs to find a “middle path of neither being too aggressive nor too cautious” in 2025, as high inflation in the services sector, which remained at 4 percent in December, continues to create risks to price stability. . .
“If interest rates fall too quickly, it will be difficult to control services inflation,” Lin told Der Standard.
But the chief economist warned more clearly than in his previous public statements that weak growth poses a threat to price stability.
“We also need to make sure that the economy does not grow too slowly, because then we will face a new problem, which is that inflation may stabilize below the target level,” he said.
Asked about A A recent poll conducted by the Financial Times While many economists said the ECB was too slow to cut interest rates, Lane said the central bank's “primary focus” was on inflation rather than growth. But he added, “Growth is the primary driver of inflation dynamics.”
But he stressed that policymakers “don't see the kind of recession risks that would call for a significant acceleration in monetary easing,” a sign that the larger half-percentage-point interest rate cuts that some economists had been hoping for were unlikely.
