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ECB Is Far From Inflation ‘Red Zone’ Despite Warnings, Lane Says

ECB Is Far From Inflation ‘Red Zone’ Despite Warnings, Lane Says

European Central Bank Chief Economist Philip Lane pushed back against warnings over accelerating inflation, saying there’s “very solid evidence” to believe that the current spike won’t last. 

“The red zone for everyone is if inflation became persistent at a number that’s immoderately above the inflation target,” Lane said on Thursday. “That’s a very far distance from where the euro area is. We have to be the counterweight, honestly, in this debate.” 

Speaking at a conference organized by the ECB and the Federal Reserve Bank of Cleveland, he highlighted that “there’s solid reasons to believe that a lot of this is to do with the reopening of the economy and there’s very solid reasons to believe there’s a significant transitory component.”

The comments highlight the differing assessments of the outlook for prices in the ECB Governing Council. Officials largely agree that the current spike is of a temporary nature, yet some have recently put more emphasis the upside risks, such as longer-lasting supply chain bottlenecks and rising wages. 

ECB Is Far From Inflation ‘Red Zone’ Despite Warnings, Lane Says

Lane said that while the energy crunch facing the European economy is pushing up headline inflation readings, “it’s also by and large contractionary -- it’s a headwind for the economy.”

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