May 27, 2024 12:09 GMT
ECB: Lane Outlines Conditions For Additional Policy Easing
ECB
As noted by wire headlines, ECB's Lane does not commit to a particular rate path in his speech (as in this morning's interview with the FT). However, he provides a more detailed discussion on the conditions required for additional rate cuts beyond the June meeting.
A few highlights from the speech:
- "The subsequent pace of rate cuts will be slower if there are upward surprises to underlying inflation (especially in relation to the underlying dynamics of domestic inflation and services inflation) and the level of demand (in view of the implications of demand conditions for the medium-term inflation outlook)".
- "Given the lags in transmission, the tightening effects from our past interest rate hikes are still unfolding....model-based analysis suggests that the bulk of the impact on inflation is comparatively backloaded, with substantial pass-through still expected to transpire in the period ahead"
- "The calibration of the appropriate degree of restrictiveness should adjust for the impact of lower expected inflation"
- "The overall restrictiveness of aggregate financial conditions also depends on the evolution of term premia and risk premia".
- "Easing the stance too quickly would not be consistent with inflation sustainably returning to target if inflation turns out to be more persistent than anticipated"
- "Keeping rates overly restrictive for too long could push inflation below target over the medium term. This would require corrective action through a subsequent acceleration in rate cuts that could even require having to descend to below-neutral levels to fix any persistent drift towards a below-target inflation trend".
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