The European Central Bank isn’t happy with the inflation outlook and will decide “meeting by meeting” whether more monetary stimulus will be needed, chief economist Philip Lane said in an interview with the Wall Street Journal.
Lane pointed to data arriving over the coming weeks that will help policy makers make their decision, dodging a question on whether updated forecasts in December might be a trigger.
“I wouldn’t focus on any one meeting,” Lane said. “It’s not the case that we only look at the formal projection rounds.”
Economists widely expect the ECB to expand its 1.35 trillion-euro ($1.6 trillion) emergency asset-purchase program by the end of the year. Policy makers have publicly disagreed over whether more support is needed, with Executive Board member Fabio Panetta arguing the risk of doing too much is smaller than being “too shy” and Bundesbank President Jens Weidmann warning against presuming the central bank would act.
The euro-area inflation rate has been negative since August, and the ECB currently predicts the measure to climb to 1.3% in 2022, far below its just-under-2% goal.
“The current inflation level remains far away from our goal,” Lane told the WSJ. “We don’t think that is a satisfactory inflation outlook.”
Governing Council members from Italy and Slovakia reiterated his view.
Ignazio Visco said in a separate interview with Il Corriere della Sera that monetary policy “must be expansive and remain so for a long time.”
“Through our monetary policy we are able to intervene effectively to defeat deflation,” he was quoted as saying.
Peter Kazimir told Hospodarske Noviny newspaper the ECB will do “everything” to lift inflation.
Lane said that although the 19-nation economy will continue to recover in the fourth quarter, output at the end of the year will still be some 5% below the end-2019 level. “What is true is that the next phase is going to be tougher,” he said.
The exchange rate is just one factor in assessing the economy, he said. Equally important are the “significant” Chinese recovery, an improved outlook for the global economy that will benefit euro-area manufacturing, and significant policy support around the world.
“The exchange rate is important but the bigger global issue is the state of global demand, and that has recovered maybe better than expected,” Lane said.
(Updates with comment from ECB’s Kazimir starting in seventh paragraph.)
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