“ECB must continue restraining economy, Lane asserts” | WTAQ News Talk | 97.5 FM · 1360 AM

Inflationary pressures in the Euro zone remain strong, according to ECB Chief Economist Philip Lane. Despite a projected slowdown in wage growth next year, the European Central Bank is expected to maintain a restrictive monetary stance, holding back economic growth. The recent rate cut by the ECB was not followed by any promises of further cuts, although ECB President Christine Lagarde hinted at the possibility of future cuts.

Lane emphasized the high level of uncertainty and elevated price pressures in indicators for domestic inflation, services inflation, and wage growth. He mentioned that the ECB is not committing to additional policy easing after the rate cut, and decisions regarding further moves will depend on incoming data on a meeting-by-meeting basis.

The key driver of inflation, wage growth, is currently high as companies adjust wages in response to past inflation but is expected to slow down next year. This decline in wage growth is forecasted to contribute to a projected decrease in inflation in 2025. Additionally, corporate profit margins are expected to decrease, absorbing some of the wage increases and alleviating pressure on consumer prices.

Although economic growth has improved since the rate cut by the ECB last year, it is not anticipated to significantly raise price pressures as demand in sectors sensitive to interest rates remains subdued. Lane’s remarks were made during a speech in Dublin and indicate that only modest rate cuts are expected over the next 18 months.

By Samantha Johnson

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