Philip Lane, Chief Economist of the European Central Bank (ECB), emphasized that the extensive monetary-tightening measures implemented by the ECB are still in the process of being fully felt, despite preparations to lower borrowing costs in June.
Lane emphasized that although the effect of the tightening cycle on economic activity may have reached its peak earlier this year, analysis based on models suggests that most of the impact on inflation is anticipated to occur later, with notable pass-through effects expected in the foreseeable future.
Addressing a speech in Dublin on Monday, Lane stated that the current disinflationary trend, bringing consumer-price gains close to the 2% target, will persist into the next year. He added that this dynamic is in line with both inflation stabilizing at the target later in 2025 and a substantial economic recovery.
As policymakers face inquiries about the post-June deposit rate cut, Lane expressed reluctance to comment on the subsequent path due to uncertainties surrounding wage growth and geopolitical tensions like the conflict in the Middle East. Market expectations for three rate reductions in 2024 have been revised, with only two now fully priced in.
Given ongoing strong wage growth and persistent services inflation, Lane emphasized in an interview with the Financial Times that the ECB must maintain a restrictive policy stance throughout 2024.
In April, price growth in the 20-nation bloc held steady at 2.4% year-on-year, with analysts anticipating a slight uptick to 2.5% in May. Policymakers have stressed the volatile nature of the path toward achieving the 2% inflation goal.
Lane reiterated the ECB’s commitment to a data-dependent and meeting-by-meeting approach in determining the appropriate policy rate path, emphasizing that there is no pre-commitment to a specific rate trajectory.
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Author Faith Yakubu 
