ECB chief economist Philip Lane warned the central bank could still raise interest rates if the impact of inflation lingers longer than expected, keeping the risks alive even after the March pause.
Summary
- The ECB’s Philip Lane says rates could rise if the impact of inflation lasts longer.ecb.
- The comments reinforced the data-dependent stance after March’s decision to hold rates.ecb.
- Markets have already tripled this year amid energy risks.
The European Central Bank’s chief economist Philip Lane has warned that interest rates could still rise if inflation in the euro area proves more persistent than policymakers currently expect, leaving the door open for further tightening even after the ECB held borrowing costs unchanged in March.
According to Jinshi’s summary of Lane’s recent remarks, a member of the Executive Council said that “if the impact of inflation lasts for a long time, the European Central Bank will consider raising interest rates,” stressing that the fight against price growth above the target is not over.
His comments confirm recent guidance from ECB President Christine Lagarde, who told the Financial Times that “if we expect inflation to deviate significantly and persist from the target, the response should be strong or persistent accordingly,” indicating that rate hikes remain on the table if price pressures accelerate again.
In its March policy decision, the ECB left its three key interest rates unchanged and reiterated that it is “determined to ensure that inflation stabilizes at the 2% target over the medium term,” while acknowledging that the Middle East conflict has created risks to inflation through higher energy costs.
The central bank’s latest projections see inflation falling to around 2.6% in 2026 and rising to around 2% in 2027 and 2028, but officials including Lane have signaled that wages and corporate pricing plans will be closely watched “at every meeting” to judge whether those forecasts hold.
Lagarde also stressed that “self-reinforcing measures” could take hold if inflation expectations deviate from the target, warning that the risk of an anchor cut “will be great” without a strong enough response, a situation that has kept markets wary of declaring the cycle of hiking over.
Financial market traders are currently pricing in two to three ECB rate hikes by the end of the year, which could raise the key policy rate to a range of around 2.50% to 2.75%, a period seen as highly sensitive to inflationary data and developments in energy markets.
For crypto investors, Lane’s signal that rates may rise if inflation continues adds another major variable to watch alongside European inflation data and central bank communications that crypto.news tracked in previous coverage of the ECB’s decisions and their entry into the Bitcoin and Ethereum markets.
