A few highlights from this excellent interview with ECB Chief economist Philip Lane, who's essentially previewing the ECB's next decision. (1/n) ecb.europa.eu/press/inter/da…
Number of mentions in Lane's interview:
"uncertainty": 11 times
"fiscal": 16 times
That's all you need to know about the ECB's outlook right now. (2/n)
"uncertainty": 11 times
"fiscal": 16 times
That's all you need to know about the ECB's outlook right now. (2/n)
Lane says (about 7 times) that the ECB will be more data dependent than usual going into the next meetings. "We’re going to get a lot of information [about the fiscal plans, the pandemic, growth/inflation, FX, oil prices]".
By December, the ECB should have made a decision. (3/n)
By December, the ECB should have made a decision. (3/n)
Lane still sounds very dovish on inflation, blaming mostly the "huge amount of slack" and stressing the risk to inflation expectations. He still expects inflation to "climb" in 2021, but it remains "far away from our goal" which is "not a satisfactory outlook". (4/n)
I don't think Lane is opening the door to rate cuts. Provided that the pandemic "will be mostly a temporary shock", "the implications of a short-term rate cut in the yield curve are going to be less". The ECB thinks that "asset purchases have a bigger impact". (5/n)
Finally in terms of the strategy review, Lane seems to hint at a (light) version of the Fed's AIT. "One version of how you might anchor expectations is the new formulation of the Fed." E.g. mandate symmetry + strengthened forward guidance. (6/n)
First step of the ECB's version of AIT: Lane mentioned 8 times the need for the ECB not to tighten policy prematurely. We're going to hear this over and over. (7/7)
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