ECB’s Lane braces for tougher phase for eurozone economy

FRANKFURT: The eurozone zone economy is entering a tougher phase as a surge in coronavirus cases puts a question mark over the recent rebound, the European Central Bank’s chief economist Philip Lane said in an interview published on Sunday.

With a second wave of the Covid-19 pandemic sweeping Europe, governments across the region have started to implement fresh restrictions, albeit mostly localised and focused on leisure activities.

“The next phase is going to be tougher,” Philip Lane told the Wall Street Journal.

“The big question, and this is why there is so much uncertainty, is: how quickly can the current dynamic, with rising cases, be stabilised.”

Lane reaffirmed his line that the 1.3% inflation rate currently expected in 2022 was “far away” from the central bank’s goal of just under 2%.

But he was keen to dampen expectations for fresh stimulus from the ECB as soon as this month, saying the central bank would wait to see how governments respond to the challenge as they publish their budgets for 2021.

“Some of that uncertainty will be resolved this autumn,” Lane said. “We will know the fiscal plans, we will know more about the pandemic.”

Asked about whether the ECB was set to copy the Federal Reserve in pursuing an average inflation rate of 2%, Lane simply said the ECB’s goal was already symmetric and interest rates would not rise until inflation was “in the neighbourhood of the aim”.

Italy’s central bank governor Ignazio Visco also said, in a separate interview published on Sunday, that inflation levels of 1% or 1.5% were “too low”