Interest rate comment from ECB Chief Economist

European Central Bank (ECB) Chief Economist Philip Lane said that interest rates need to rise to the ‘restrictive area’ in order for inflation to fall to target. In an interview with the Financial Times, ECB Chief Economist Lane stated that interest rates need to rise further. Lane said, “We need to bring interest rates down to restrictive levels. We will use our experience to determine where the final level is.” Last year, the ECB increased interest rates by a total of 250 basis points in order to fight inflation, and officials had given messages of further increases. Bloomberg economists expect the deposit rate, currently at 2%, to rise to 3.25%. Lane stated that they will act on a data-based and meeting-based basis regarding interest rate hikes. Lane stated that there is flexibility in both directions regarding interest rates. Lane, who has been the bank’s Chief Economist since 2019, is one of the dovish members of the ECB. Lane continued his words as follows; "Right now, the risks are not two-sided. Interest rates still need to rise. As we make progress, the risks will be two-sided. Then we will need to balance the risks. But this is not the case for the next few meetings, this is a process that will take place over the next 1-2 years," he said.