ECB's Philip Lane signals potential for rising underlying inflation despite energy price declines, while maintaining a cautious stance on providing explicit forward guidance.
ECB Chief Economist Philip Lane flagged possible second-round inflation effects and said underlying inflation could rise even as falling energy prices pull headline inflation lower. That keeps the door open to policy staying restrictive, a mildly supportive signal for the euro. However, he also put a high bar on directional forward guidance, so the remarks offer no clear policy signal and the move may fade.
ECB Chief Economist Philip Lane warned that underlying inflation could rise even as falling energy prices pull headline inflation lower. Speaking at the Bank of England Watchers Conference, Lane noted that second-round inflation effects would be unsurprising and emphasized that the ECB maintains a high bar for providing directional forward guidance.
Lane suggested that second-round inflation effects are likely and that underlying inflation could rise even if energy prices pull headline inflation down. That reading keeps pressure on the ECB to stay cautious about cutting rates, which tends to support the euro.
No. He said the ECB puts a very high premium on consensus and that he would put a high bar on directional forward guidance, so no clear policy direction was given.