ECB’s Lane: More rate hikes will be needed after March

The European Central Bank will have to continue raising interest rates after this month’s meeting, in the light of strong underlying inflation, the ECB’s chief economist Philip Lane said on Monday.

“The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting,” Lane, an influential figure on the ECB’s Frankfurt-based directorate, said in a speech in Dublin, although he didn’t commit the extent of any further tightening beyond March.

“While there has been a clear turnaround in energy inflation and there are some signs of deceleration for food inflation, momentum for core inflation has not declined,” Lane explained, highlighting that “momentum in the goods category remains strong.”

Investors moved to price in predictions that the ECB may boost its deposit rate to an all-time high of 4% by the end of the year, and only start to reverse course in 2024, as a result of higher-than-expected consumer inflation statistics for February, notably core inflation, which surged to 5.6%.

The European Central Bank is almost certain to raise its three main interest rates by 50 basis points at its meeting on March 16. A similar increase is also widely expected at the following meeting in May, according to several experts. The remarks from Lane, perhaps the most senior “dove” at the ECB, show that Frankfurters are not opposed to the notion.