ECB’s Lane says higher long-term rates could temper inflation

The European Central Bank published an Ansa interview with executive board member Philip R. Lane on 6 October in which he said higher long-term interest rates, particularly when driven by global forces, could slow the euro-area economy and reduce inflation. The ECB would weigh that effect alongside its inflation and risk assessments when setting its policy rate, he said, without signalling a particular next move. The interview was conducted on 1 October. [1]

Lane said an investment surge in the United States was one factor behind the rise in long-term yields raised by the interviewer. US companies investing in artificial intelligence were taking on substantial long-term debt, he said. The ECB would examine lending and company surveys for signs that higher rates were affecting investment and employment decisions. [1]

Energy prices, meanwhile, were above the ECB’s baseline expectations, Lane said. The bank had not yet seen very strong knock-on effects elsewhere in the economy, but the extent of any wider pass-through remained uncertain. He said the inflationary effects of the energy shock had been the main driver of interest-rate decisions so far. [1]