MNI BRIEF: ECB's Lane Sees Post-Pandemic Inflation Step Change

The very low-inflation regime seen in the eurozone before the Covid pandemic may not return once the health emergency is over, European Central Bank Chief Economist Philip Lane told a webcast hosted by MNI.

Factors supporting a shift to higher inflation expectations include fiscal support in response to the pandemic, as well as the ECB’s new monetary policy framework, with its commitment to a 2% target over the medium term, Lane said. Changing demographics and a possible excess supply of global factory capacity may also contribute to the shift, he said, though he noted that current inflation levels do not seem likely to be sustained.

The ECB will tolerate neither an over-reaction nor an under-reaction to inflation risks, he added.