The European Central Bank is likely to raise interest rates next month assuming its outlook for the economy doesn’t change significantly as a result of the recent financial turmoil, Chief Economist Philip Lane reiterated.
(Bloomberg) — The European Central Bank is likely to raise interest rates next month assuming its outlook for the economy doesn’t change significantly as a result of the recent financial turmoil, Chief Economist Philip Lane reiterated.
“If the baseline we developed before the banking stress holds up, it will be appropriate to have a further increase in May,” Lane told the Cyprus News Agency in an interview published Thursday.
“However, we need to be data-dependent about the assessment of whether that baseline still holds true at the time of our May meeting,” he said.
With worries persisting about the health of the banking industry, ECB officials have been highlighting of late that their most aggressive period of monetary tightening is nearing its conclusion.
Core inflation is the caveat. The gauge, which excludes things like food and energy, hit another record in March, even as headline price gains in the 20-nation euro area sank by the most on record.
Policymakers largely agree that the development of underlying price pressures will dictate how much higher rate must rise. They lifted the deposit rate to 3% from 2.5% last month and have mostly been tight-lipped on what the next meeting, in May will bring.
Lane said that while the ECB is “always on guard,” the euro-area banking system “is in good shape.”
At the same time, he said “the European economy is performing relatively well and is expected to grow by around 1% this year.”
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