The inflation rate in Europe experienced a massive uptick at a comparable rate to their North American peers in late 2021 through to 2022, when inflation peaked. Like their North American counterparts, the European Central Bank (ECB) sought to combat soaring inflation by raising interest rates. The ECB undertook an aggressive interest rate tightening policy. However, there are strong signs that the ECB is finally ready to ease down and move towards a more accommodative monetary policy in the middle of the decade.
Philip Lane, a chief economist for the ECB, recently told the Financial Times in an interview ahead of the bank’s June 6 meeting that: “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.” Oddsmakers appear confident that the ECB will lower its benchmark deposit rate by at least a quarter percentage point compared to its record high of 4%. Eurozone inflation recently slipped close to the ECB’s 2% inflation target.
Lane said that the key reason inflation had fallen faster in the Eurozone was because the region was hit harder by the energy shock that was triggered by Russia’s 2022 invasion of Ukraine. “Dealing with the war and the energy problem has been costly for Europe,” Lane said. “But in terms of that first step that is a sign that monetary policy has been delivering in making sure that inflation comes down in a timely manner. In that sense, I think we have been successful.”
Related Stories
