European Central Bank Chief Economist Lane: Further interest rate cuts may be necessary to ensure economic growth

Zhitong
2025.01.13 06:46
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European Central Bank Chief Economist Philip Lane stated that to ensure economic growth and price stability, further interest rate cuts and more monetary easing may be implemented. He pointed out that without policy adjustments, the inflation target would be at risk. Although the inflation rate rose to 2.4% in December, it is expected that consumer price increases will reach the target. The Eurozone's economic growth is slow and faces multiple risks, particularly the economic weakness and political turmoil in Germany and France

According to the Zhitong Finance APP, Philip Lane, the chief economist of the European Central Bank, emphasized that in order to ensure economic growth in Europe and fulfill the mission of price stability, the European Central Bank may further lower interest rates and implement more monetary easing policies. He pointed out at a conference in Hong Kong that failing to further adjust the policy stance would pose risks to achieving the inflation target.

It is understood that ECB policymakers are determining the pace and extent of reducing borrowing costs by 2025. Last year, the ECB lowered interest rates four times, each by 25 basis points. Although easing policies may continue to be implemented in a similar manner, some officials have stated that due to the stagnation of the European economy and the numerous risks it faces, the possibility of a larger rate cut of 50 basis points should not be ruled out.

Despite last week's data showing that the inflation rate rose to 2.4% in December, the ECB predicts that consumer price increases will reach its target later this year. The Eurozone economy may have only grown by 0.7% last year, while the ECB forecasts it will grow to 1.1% by 2025. The output of the two largest economies in the region—Germany and France—is weak, and both are in a state of political turmoil, hindering the region's development.

Later this month, after Donald Trump returns to the White House, the EU threatens to impose tariffs, further increasing uncertainty. ECB President Christine Lagarde stated that if the EU negotiates with the U.S. regarding potential trade tariffs instead of immediately taking countermeasures, the EU may be in a more favorable position.

However, Olli Rehn, a member of the Finnish Management Board, suggested a tougher stance on Monday while attending the Asian Forum with Lane. He pointed out, "If you look at trade policy from an economic perspective, it is advisable not to retaliate, as that would worsen your situation." But he also stated, "If I were in the EU government, I would not just stand still—merely taking the hits."