The European Central Bank (ECB) has decided to hold its interest rates at 4% for the foreseeable future, following a hike of 0.25 percentage points last week. This decision comes as the bank seeks to reduce inflation to its target of 2%, according to the ECB’s Chief Economist, Philip Lane.
Lane expressed confidence in the rate increment’s ability to significantly curb inflation, despite acknowledging considerable uncertainty surrounding this decision. He underscored the need to maintain the 4% rate for a substantial period to effectively manage inflation and affirmed that the bank’s decisions will continue to be data-driven.
In a discussion with Jennifer Schonberger last week, Lane provided an assessment of the current economic climate, describing it as stable rather than fragile. He attributed this stability to the robust health of the banking system and improved household and corporate balance sheets in the aftermath of the pandemic.
Addressing concerns about a potential deep recession, Lane stated that the necessary conditions for such an event are currently absent. His insights were part of a broader discussion available on a financial news platform.
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