Consumer price inflation almost at its peak, says ECB economists

European Central Bank Chief Economist Philipp Lane has stated that consumer price inflation is almost its peak as he conceded that lending rates are likely to be increased again.

Inflation about to peak, says ECB economist

Commenting on whether inflation is soaring, Lane told Milano Finanza newspaper that it is still early to decide, but he can confidently say that inflation is about to peak. However, it is still being determined whether this is the peak or inflation will peak at the start of next year.

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Lane said,

We do expect that more rate increases will be necessary, but a lot has been done already. The starting point is different now. We’ve already hiked rates by 200 basis points. We should take into account the scale of what we have already done.

Bloomberg’s Chief European Economist Jamie Rush said,

We expect the ECB to hike through winter, taking the deposit rate to 2.75% in March. Falling headline and core inflation should mean the Governing Council cuts rates toward the end of 2023.

Regarding consumer prices, the chief economist of the ECB stated that he cannot really rule out additional inflation in early 2023. However, later in 2023, in the summer or spring, when the first few months of 2023 have passed, a sizable inflation rate decline is likely. Despite this, inflation will take some time to return to its previous level of 2%.

Inflation could drop to 6%-7% in 2023                                            

When asked if the inflation rate could drop to 6%-7% next year, the economist stated that the initial decline from present rates is likely to be around that threshold, with more reductions expected.

Lane added that they still do think a second inflation rate is likely because of the higher-than-usual pay hikes in the next three years. As a result, it is likely to take a while to return to the 2% target. Lane concluded that the impacts of the second round are likely to drive inflation in 2023 and 2024.

Regarding whether inflation will drop to 2% by 2025 when war-related and pandemic factors have ended, Lane said that they anticipate inflation to get close to the target since the ECB has raised rates and will raise them again.