ECB/Lane: We Will Adopt a Data-Driven and Meeting-Based Approach to Determine an Appropriate Monetary Policy Stance

Forex - Philip Lane, member of the European Central Bank's Governing Council and Chief Economist, stated that they will adopt a data-driven and meeting-by-meeting approach to determine the appropriate monetary policy stance.

In comments made on MNI's web broadcast, Lane indicated that incoming information and recent staff projections suggest that the disinflation process is progressing well, noting, "Although domestic inflation remains high, it should decrease as service inflation dynamics become more moderate and labor cost pressures ease. The recent cuts in policy interest rates are gradually reflecting in funding costs; however, financing conditions across the entire transmission chain, starting from the level of our policy interest rate, including the market interest rates that financial intermediaries apply to households and firms, continue to be restrictive."

Looking ahead, Lane asserted that "in the current environment of high uncertainty, it would be prudent to maintain agility on a meeting-by-meeting basis and not to commit to a specific interest rate path." He further elaborated: "From a risk management perspective, in the event of upward shocks to the inflation outlook and/or economic momentum, monetary expansion may proceed more slowly compared to the interest rate path outlined in the December projections. Similarly, in the case of downward shocks to the inflation outlook and/or economic momentum, monetary expansion may proceed more rapidly. Other things being equal, the interest rate path will also be influenced by our ongoing assessment of core inflation dynamics and the transmission strength of monetary policy."

Finally, Lane emphasized their determination to ensure that inflation sustainably stabilizes at the medium-term target of two percent, stating, "We will adopt a data-driven and meeting-by-meeting approach to determine the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook in light of incoming economic and financial data, the dynamics of underlying inflation, and the effectiveness of monetary policy transmission. We are not committing in advance to a specific rate path."