ECB's Lane: Euro area unlikely to revert to persistent below-target inflation trend

The euro area is unlikely to revert to the persistent below-target inflation trend that was so entrenched before the pandemic, European Central Bank Chief Economist Philip Lane said on Thursday, per Reuters.

Additional takeaways

"The significant jump in energy prices since the summer of 2021 represents a major macroeconomic shock."

"Cyclical factors are likely to be important for the course of monetary policy, in addition to the underlying normalisation process."

"It is important to take the time to observe the impact of shifts in financing conditions on inflation dynamics."

"The timeline to complete this normalisation process is intrinsically uncertain for two basic reasons."

"Most recent signals from surveys and market-based measures also suggest that the right tail of the distribution is expanding, which warrants close monitoring."

"Wage settlements suggest that wage-setters understand that there is a temporary component to the currently high inflation rate."

"There has been a significant shift from an inflation risk discount until mid-2021 to an increasing inflation risk premium in recent months."

"Wage-setters understand that there is a temporary component to the currently high inflation rate."

Market reaction

These comments don't seem to be having a significant impact on the shared currency's performance against its major rivals. As of writing, the EUR/USD pair was down 0.2% on the day at around 1.0600.