ECB policy must stay restrictive into 2025, chief economist says
-The European Central Bank is ready to cut interest rates next month but policy must continue to be restrictive this year as wage growth will not normalise until 2026, ECB chief economist Philip Lane told the Financial Times.
"The best way to frame the debate this year is that we still need to be restrictive all year long," he added."But within the zone of restrictiveness we can move down somewhat." At 4%, the ECB's deposit rate holds back growth and there is little debate that the first few cuts, at least until 3% but possibly further, merely remove restriction rather than provide stimulus.
A key wage indicator accelerated last week, spooking some but Lane said the figure was well anticipated and a slowdown was already in the works.
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