ECB Chief Economist Philip Lane offered a cautiously optimistic take on inflation, saying slowing in goods and services gauges are welcome and that underlying pressures will keep weakening.
In an interview with Irish website the Currency, he described 2023 as the year of “peak second round” as the effects of prior increases feed through the economy.
“Inflation is standing at 5.3% overall, which remains high,” he said. “In terms of looking for signals of momentum and signals of directional change, I would underline the fact that there has been some easing in goods inflation and services inflation, which is a welcome development.”
Lane didn’t specify a preference for what to do at the upcoming Sept. 14 interest-rate decision, where officials are poised to debate either another increase or a pause. President Christine Lagarde, speaking on Monday, also refrained from offering a view.
The chief economist, who has leaned toward the dovish end of the spectrum, did offer some hints of hope that the challenge of taming consumer-price growth isn’t as daunting as it once was, emphasizing that an underlying measure that strips out volatile elements such as energy is showing progress.
“We do expect to see this famous core inflation come down throughout the autumn,” he said.
Lane spoke just after the release of the euro zone consumer-price report for August, which was the last one for the ECB to consider before its decision. That showed inflation stuck above 5% on both the headline and core gauges.
Officials have stated that they want to bring consumer price growth to 2% in a “timely manner.” Lane offered a definition of that.
“It’s sufficiently quickly that everyone understands that the current inflation episode is time-limited, it’s temporary, and therefore you should not change your longer-term behavior embedding the idea that inflation would remain high,” he said. “We want people to understand that this is a temporary inflation episode.”
Officials have until the close of play on Wednesday to publicly debate the decision before a pre-meeting blackout period kicks in. Among officials scheduled to speak on Tuesday are Bank of Italy Governor Ignazio Visco.
(Updates with remarks starting in second paragraph)
