ECB’s Top Economist Signals Smaller Hikes After 'Major' Step Last Week
Lane’s comments reiterate that unless anticipated peak of the tightening cycle moves higher, future moves will be more contained.
(Bloomberg) -- The European Central Bank’s unusually large interest-rate hike last week was “appropriate,” Chief Economist Philip Lane said, while signaling that future steps are likely to get smaller.
With euro-area inflation rates far too high, a “major step” was needed to accelerate the shift away from highly accommodative borrowing costs, Lane said Wednesday. The Irish economist is considered one of the ECB’s most dovish policy makers, and is also responsible for crafting the proposals presented to the Governing Council.
“We expect that this transition will require us to continue to raise interest rates over the next several meetings,” Lane said. “The appropriate size of an individual increment will be larger, the wider the gap to the terminal rate and the more skewed the risks to the inflation target.”
While other ECB officials told Bloomberg last week that they weren’t ruling out a further 75 basis-point hike, Lane’s comments reiterate the view that unless the anticipated peak of the tightening cycle, known as the terminal rate, moves higher, future moves will be more contained.
He also said, however, that risks to the inflation outlook remain on the upside. August data from the US this week beat expectations, cementing expectations for a larger move by the Federal Reserve at its next meeting.
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