The ECB's chief economist, Philip R. Lane, has indicated that inflation in the eurozone is on track to reach the 2% target by 2026. The institution is maintaining its interest rate strategy to ensure price stability.
The European Central Bank (ECB) is confident that inflation in the eurozone will stabilise at 2% during 2026, as stated by its chief economist, Philip R. Lane, in a public address on Monday. The institution believes that the price trajectory is approaching the set target after the spikes of recent years.
Lane explained that the ECB's current projections point to a gradual convergence towards the medium-term inflation target. The Irish economist emphasised that the restrictive monetary policy implemented so far is yielding results and that the disinflation process is continuing.
However, the ECB warns that there are still upward risks to prices, particularly in the services and wage sectors. Lane noted that the institution will closely monitor the evolution of labour costs and domestic demand to adjust its strategy if necessary.
The chief economist's statements come in the context of a moderation of overall inflation in the eurozone, which has recently fallen below 3%. However, core inflation — which excludes energy and food — remains stickier, forcing the ECB to maintain caution.
For Spanish companies, stabilising inflation at 2% would mean relief in their financing costs and greater predictability in their investment plans. Interest rates, currently at 4.5%, could begin to decrease throughout 2025 if inflation follows the expected path.
Lane insisted that future decisions by the ECB will depend on the economic data that is published. The institution does not commit to a specific date for the first rate cut, but markets are pricing in that it could occur in the second half of 2025.
The ECB maintains its meeting-by-meeting approach, evaluating each macroeconomic indicator before taking action. The next Governing Council meeting will be in December, where economic projections will be updated and the direction of monetary policy will be discussed.
The eurozone economy, for its part, shows signs of weakness. Germany, the industrial engine of the bloc, is going through a phase of stagnation that is dragging down overall growth. Lane acknowledged that the geopolitical environment and the weakness of external demand add uncertainty to the outlook.
For investors and savers, the ECB's forecast implies that interest rates will remain at elevated levels for longer than initially expected. Bank deposits and fixed income continue to offer attractive returns, while financing for mortgages and business loans remains expensive.
The ECB thus reaffirms its commitment to price stability, even at the cost of sacrificing short-term growth. The institution is confident that once inflation is under control, the European economy will return to a path of sustainable expansion.
The coming weeks will be crucial to confirm the disinflation trend. Inflation data for November in the main eurozone countries will be published at the end of the month and will serve as a thermometer for the ECB. If they confirm moderation, the central bank's rhetoric could shift towards a more dovish tone.
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