May 26, 2023
Lane Expects ECB to Turn Corner on Inflation, Not There Yet
(Bloomberg) -- The European Central Bank’s battle with inflation is nearing a crucial stage but there’s still work to be done, according to Chief Economist Philip Lane.
There’s still momentum in rising goods and food prices, Lane told a panel in Dubrovnik, Croatia, stressing that uncertainty remains “pretty high.”
“We expect to turn the corner, but I wouldn’t say we reached that corner quite yet,” he said Friday. “We do think that this spectacular reversal of energy prices will feed into core, but timing is uncertain.”
Officials have raised interest rates at the fastest pace in ECB history to counter runaway inflation in the wake of Russia’s war in Ukraine. While price gains are well down from their record, underlying pressures that exclude food and energy costs remain elevated and have become the key focus for policymakers in Frankfurt.
Some suggest hikes may need to persist beyond the two quarter-point moves that economists and investors widely expect in June and July to complete the monetary-tightening campaign.
Once at their peak, borrowing costs should stay there for a “significant” period of time, Dutch central bank chief Klaas Knot said Thursday.
Addressing the same panel Friday, Croatia’s Boris Vujcic said price growth is proving sticky.
“Inflation momentum is still persistent — especially the core and food components,” he said, while insisting that officials will meet the 2% target in the next two years.
(Updates with more from Vujcic in final paragraph.)
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