ECB Making Good Progress, But Task Not Complete, Says Lane – Reuters

JACKSON HOLE, Wyoming – The European Central Bank (ECB) is making "good progress" in its efforts to bring inflation down to the target of 2%, but assurances of success remain uncertain, according to ECB chief economist Philip Lane. He emphasized that restrictive monetary policy is still necessary.

After a series of rate hikes, the ECB cut interest rates for the first time in June. A further reduction is widely anticipated on September 12, which would lower the deposit rate to 3.5%. This level is still considered high enough to restrain economic growth.

During the U.S. Federal Reserve’s annual economic symposium in Jackson Hole, Lane stated, "My interim assessment of the effectiveness of ECB monetary policy … is that there has been good progress in delivering the overriding goal." However, he cautioned against premature celebration, as projections suggest that inflation might not return to the 2% target until the end of 2025.

"The return to target is not yet secure," Lane, a key figure in shaping the ECB’s policy actions, stated. He underscored that the monetary stance will need to remain restrictive for as long as necessary to facilitate the disinflation process.

Market expectations indicate that the ECB will likely reduce rates in both September and December, with some investors speculating on a possible cut in October, driven by concerns about a rapid deterioration in the growth outlook and a desire to support the labor market.

While he did not comment on immediate policy decisions, Lane also warned against maintaining excessively tight policy for an extended period, as it could hinder growth and negatively impact the labor market. He noted that "a rate path that is too high for too long would deliver chronically below-target inflation over the medium term and would be inefficient in terms of minimizing the side effects on output and employment."