European Central Bank Chief Economist Philip Lane said on Thursday that if medium-term inflation is expected to stabilise around the bank's 2.0% target, this would permit a gradual normalisation of monetary policy settings. If inflation threatens to persist significantly above the 2.0% target over the medium-term, tightening of monetary policy will be required, Lane added. On the other hand, if inflation is expected to fall significantly below the 2.0% target over the medium term, setting a more accommodative monetary policy will be necessary. Finally, Lane said that there are several factors that suggest that the excessively low inflation environment that prevailed from 2014 to 2019 might not re-emerge even after the pandemic cycle is over. 

Market Reaction

Lane's comments do not add anything new to the near-term ECB policy debate and have thus not provoked any notable market reaction.