In an interview with the Financial Times, ECB Chief Economist Philip Lane indicated that the central is preparing to adjust its monetary policy approach as inflation moves closer to the 2% target.
While acknowledging that inflation has fallen near the desired level, Lane noted that “there is a little bit of distance to go,” especially with services inflation needing further reduction.
However, Lane emphasized that once the disinflation process is complete, monetary policy decisions will need to become “essentially forward-looking,” focusing on upcoming risks rather than relying on past data. He highlighted the importance of scanning the horizon for “new shocks” that could impact inflation pressures.
Over the course of next year, Lane expects a “transition to a more sustainable neighborhood of 2%,” signifying a shift from combating high inflation to maintaining price stability on a sustainable basis.
