ECB Chief Economist Philip Lane said eurozone inflation has seen several upward momentum surprises in recent months. This indirectly casts doubt on the central bank’s expectation that inflation will fall below its target early next year. While inflation remains close to 2%, recent data shows price pressures in the services sector are increasing.
Lane stressed that the risk of inflation is now not one-sided and could potentially exceed the ECB’s forecast, which previously forecast a reading of 2.1% in 2025 and a drop below target in 2026 due to low energy prices. However, some recent price data points to the opposite trend.
Headline inflation rose slightly to 2.2% last month, while core inflation also came in above expectations in October. The move adds to uncertainty about the momentum of disinflation in the eurozone.
Lane is expected to present new inflation forecasts including a 2028 forecast at the ECB’s December 18 meeting, when the central bank is expected to keep the deposit rate at 2%.
In his speech, Lane stressed that the ECB should not react to short-term price movements that are expected to be temporary, suggesting no major policy changes in the near future.
