Euro zone inflation could remain above the European Central Bank’s 2% target for some time, even if peace in the Middle East materialises, ECB chief economist Philip Lane said today.<\/p>\n
The ECB raised interest rates this month to prevent higher energy prices from pushing up longer-term inflation expectations and financial markets see at least one more move later this year, even as energy prices have fallen well below recent highs.<\/p>\n
Speaking to European politicians in Brussels, Professor Lane said inflation could remain well above target into the first half of 2027 after it rose above 3% last month.<\/p>\n
“While recent progress towards a resolution of the conflict in the Middle East is welcome, uncertainty remains elevated and there are continued risks for inflation to stay above our 2%medium-term target for quite some time,” he told the European Parliaments ECON committee.<\/p>\n
However, charts published along with Philip Lane’s speech also showed that the recent fall in prices now puts oil more firmly between the bank’s “baseline” and “milder” scenarios.<\/p>\n
While these scenarios do not directly impact the next policy decision, a move towards the milder outcome lowers any urgency for the ECB to follow its June hike already next month.<\/p>\n
Indeed, markets see just a one in five chance of a hike in July and the next move is fully priced in only for December.<\/p>\n
Philip Lane added that high inflation and expensive energy will weigh on economic activity but the impact will be muted given a solid labour market and heavy investment into AI.<\/p>\n
“In addition, higher government spending on defence and infrastructure should continue to support public investment. These factors are expected to provide some cushioning against the fallout from the war,” he added.<\/p>\n","protected":false},"excerpt":{"rendered":"Euro zone inflation could remain above the European Central Bank’s 2% target for some time, even if peace…\n","protected":false},"author":2,"featured_media":514541,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,61,60],"class_list":["post-514540","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-ie","tag-ireland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/514540","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=514540"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/514540\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/514541"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=514540"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=514540"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=514540"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}