BUSINESS-ECONOMY
The comments come as more and more policymakers are joining the chorus of expectations in markets for a second cut in borrowing costs at the ECB's next meeting, in September. Some also signal that another one or two cuts are possible this year beyond that. The battle to get inflation back to the ECB's target of 2 per cent is far from over, and interest rates must be at least as high as needed to do so without excessively hurting the economy, the European Central Bank's chief economist, Philip Lane, said. "The return to target is not yet secure," Lane said Saturday. "In particular, the monetary stance will have to remain in restrictive territory for as long as is needed to shepherd the disinflation process towards a timely return to the target." However, in prepared remarks for a panel at the Federal Reserve's annual conference in Jackson Hole, he warned that too-tight policy also poses dangers — particularly to a eurozone economy that data suggest is losing momentum. "The return to target needs to be sustainable," Lane said. "A rate path that is too high for too long would deliver chronically below-target inflation over the medium term and would be inefficient in terms of minimising the side effects on output and employment." The comments come as more and more policymakers are joining the chorus of expectations in markets for a second cut in borrowing costs at the ECB's next meeting, in September. Some also signal that another one or two cuts are possible this year beyond that. The ECB started to cut rates in June, citing greater confidence that inflation would come back to target in the second half of 2025. Most officials see recent data as consistent with that projection, although there is a firm sense they have become more worried about the deteriorating economic backdrop. Speaking later on the panel, Lane was more sanguine. "There's a lot of momentum in the European economy," he said. "There should be a lot of recovery." "There has been good progress in delivering the overriding goal of making sure that inflation returns to target in a timely manner," Lane said. "Crucially, this disinflation process has been underpinned by the forceful transmission of monetary policy to the financial system, the level of demand and inflation expectations." A journalist, writing for the WION Business desk. Bringing you insightful business news with a touch of creativity and simplicity. Find me on Instagram as Zihvee, tr None
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