‘Good degree of confidence’ that inflation is on the way back to 2 per cent
European Central Bank chief economist Philip Lane signalled a preference for caution on the pace of further rate cuts after the authority moved last week to cut official interest rates for the first time after an unprecedented spate of hikes. Photograph: Paulo Nunes dos Santos/Bloomberg
Its key deposit rate was reduced last week by a quarter of a percentage point to 3.75 per cent. The ECB governing council had hiked the rate from minus 0.5 per cent to 4 per cent between July 2022 and last September in an effort to tackle inflation. “In a world of uncertainty, one way to deal with uncertainty is a little bit of waiting – wait, make sure you’re not taking a step that you’re going to regret.”
He said that the ECB is still “far above what’s called a neutral rate”. The consensus view among economists is that the central bank’s neutral deposit rate would be around 2-2.5 per cent.
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