ECB's Forward-Looking Strategy: A Shift in Monetary Policy

The ECB should base future monetary decisions on anticipated risks rather than current data, according to Philip Lane. As inflation nears the ECB's 2% target, Lane advises a forward-looking approach to handle upcoming economic shocks. Eurozone inflation rose to 2.3% in November, suggesting cautious interest rate adjustments.

The European Central Bank is being urged to adopt a forward-looking approach in its monetary policy decisions, focusing on potential future risks over current economic data. This guidance comes from ECB Chief Economist Philip Lane, who shared his insights in an interview with the Financial Times.

Lane emphasized the importance of preparing for new economic shocks once the disinflation process is complete, noting the need for a sustained 2% inflation target. He pointed out that, although the overall inflation rate is close to the goal, services inflation must decrease further.

Recent data from Eurostat indicates that eurozone inflation rose to 2.3% in November, aligning with market expectations. This supports a cautious approach to interest rate cuts, as investors anticipate continued policy easing over the next several months.

(With inputs from agencies.)