ECB officials: Interest rate cuts this year will follow a "neutral stance"

Recently, Philip Lane, the Chief Economist of the European Central Bank (ECB), stated in an interview with the Austrian newspaper Der Standard that the ECB will seek a "middle ground" in monetary policy this year—neither triggering an economic recession nor excessively delaying the process of curbing inflation:

"What we need to do this year is find a middle path that is neither too aggressive nor too cautious."

Lane pointed out that there is room for further easing of monetary policy by the ECB in 2024; however, if interest rates decline too quickly, it will be difficult to control service sector inflation. Conversely, if interest rates remain at excessively high levels for too long, it may overly weaken inflation momentum, causing the inflation rate to fall below the target level of 2%.

Lane indicated that the conditions for controlling inflation in Europe are basically in place, and there is no need to achieve this goal by triggering a recession. It is expected that wage growth in the European region will "significantly" slow down in 2024, which will ensure a further decline in the inflation rate.

Lane also mentioned that a key condition for controlling price growth is the decline in the service sector inflation rate. For most of 2024, service sector inflation in Europe is expected to hover around 4%.

Currently, the market generally expects the ECB to implement four interest rate cuts this year, mainly concentrated in the first half of the year