ECB lane confident inflation is near peak

The European Central Bank’s chief economist Philip Lane said consumer price growth was likely near its peak but acknowledged borrowing costs would rise again.

It’s probably too early to say whether inflation is peaking, “but I’m reasonably confident to say we’re probably close to peaking inflation,” Lane told Milano Finanza newspaper in an am Interview published Tuesday. “But whether this is already the peak or whether it will arrive in early 2023 is still uncertain.”

With a week and a half before the ECB next sets rates, officials are suggesting they may be slowing their recent pace of rate hikes. Irishman Gabriel Makhlouf said on Monday that a half-point move – after consecutive 75 basis-point rises – was the most likely outcome. The talk of moderation follows the first slowdown in euro zone inflation in 1 1/2 years.

“We expect that further rate hikes will be needed, but a lot has already been done,” Lane said, according to a transcript on the ECB’s website. “The situation is different now. We’ve already hiked rates by 200 basis points,” he said. “We should consider the scale of what we have already done.”

On consumer prices, the Irish economist said he “could not rule out some additional inflation early next year and a significant drop in the rate of inflation. However, it will take time for inflation to return from the very high levels it is currently at to 2 percent.”

Asked if the inflation rate could fall to 6-7 percent in 2023, he said that “the initial fall will be from the currently high rates to around that level,” with a further fall to follow.

Still, “we believe there will be a second round of inflation,” Lane said, citing above-average pay increases over the next three years. “Therefore it will take some time before we get back to our 2 percent target. So the second-round effects will drive inflation next year and in 2024.” ECB lane confident inflation is near peak

Fry Electronics Team

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