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Lane: Need lower underlying inflation for rate hikes to end

ECB

Reuters has published an interview with ECB Chief Economist Philip Lane and the initial headlines appear to be relatively balanced, but seem to point to rates being higher for longer. He says that the case for 50bp in March remains solid (the ECB has well telegraphed this) but these headlines in isolation would provide a broadly dovish tilt:

  • POSITIVE SUPPLY SHOCKS SINCE DECEMBER, RATE HIKES, HAVE CURBED INFLATIONARY PRESSURES
  • INTERMEDIATE STAGE PRICING PRESSURES BEGIN TO FADE
  • FORWARD-LOOKING INDICATORS FOR FOOD, ENERGY, GOODS SUGGEST INFLATION SLOWDOWN
He balances out these comments by also saying that we need lower underlying inflation (and lower inflation projections) for rate hikes to end and that rates should be held at their peak for some time which would mean that rates would be in restrictive territory for a "number of quarters".
  • In terms of initial market reaction, there is little movement in EURUSD while Bund futures are at their lows of the day (but have not really moved on the story).
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