ECB's Lane Warns Against Prolonged Rate Restrictions

ECB Chief Economist Philip Lane has cautioned that maintaining a restrictive monetary policy for too long could hinder economic growth and result in inflation falling below the target of 2%. Although euro zone inflation has dropped recently, significant concerns remain, particularly with high service prices and a reliance on decreasing energy costs for the decline. Investors currently perceive a 50% chance of a 50 basis point rate cut in December, but Lane urged caution, indicating that inflation is not yet adequately balanced across sectors. He emphasized that a gradual reduction in rates is necessary, with adjustments needed for inflation to sustainably return to the target. November data is expected to show a rise in inflation to 2.4%, with forecasts suggesting it may ease back to 2% by mid-2025. Lane reiterated that the ECB must monitor the situation carefully to avoid stifling economic recovery.