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ECB policy must stay restrictive into 2025, chief economist says
By Jerry
May 27 (Reuters) – The European Central Bank is ready to cut interest rates next month but policy must continue to be restrictive this year as wage growth will not normalise until 2026, ECB chief economist Philip Lane told the Financial Times.
The ECB has all but promised a rate cut for June 6, so the debate has shifted to subsequent moves and markets have dialled back their expectations, betting on just one more cut this year.
“Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction,” Lane told the FT in an interview published on Monday.
“The best way to frame the debate this year is that we still need to be restrictive all year long,” he added. “But within the zone of restrictiveness we can move down somewhat.”
While Lane made no explicit comment about the July policy meeting, a string of policymakers including fellow board member Isabel Schnabel have already said that a second step should not come quite so soon.
Wage growth is expected to “visibly” decelerate next year and policymakers can then debate normalising policy.
Source: REUTER
