ECB Lane says further rate hikes remain justified

European Central Bank Chief Economist Philip Lane has defended the bank's recent interest rate increase and signaled that further policy tightening remains justified, citing persistent inflation pressures stemming from past energy shocks. Lane made the comments in a series of public appearances this week, including an event near London on June 18.

The ECB raised its key interest rate by 25 basis points last week, bringing the deposit rate to 2.25 percent. Lane argued the hike was necessary as inflation risks, particularly from the recent conflict between the United States and Iran, continue to pressure the Eurozone economy. He stated inflation is expected to remain above 3 percent for the rest of the year, warning that the energy-driven price shock could become more entrenched.

Despite acknowledging a softer economic outlook for the euro area, Lane emphasized that moderating growth does not negate the need for further tightening. He described the current situation as a "mid-sized" inflation shock, less severe than the crisis following Russia's invasion of Ukraine, but sufficient to require a restrictive policy stance. Underlying price pressures, especially in services driven by...