ECB may need to increase rates again in May – Lane

The chief economist of the European Central Bank, Philip Lane, has said the bank’s next decision on interest rates in May will be “data-dependent” but another rise could be “appropriate” if certain economic conditions are met.

Philip Lane made his remarks in an interview with the Cyprus News Agency, which was published today by the ECB.

In the interview, Philip Lane also drew a distinction between banks regulated in the US and Switzerland and banks regulated in the euro area.

He described euro area banks as “safe” and “strong” and not as vulnerable to changes in interest rates.

“Everyone should understand the euro area banking system is in good shape,” Professor Lane said.

He said May’s decision on interest rates will depend on three factors – the outlook for inflation, an assessment of underlying inflation and how quickly it may fall and to what extent the rate increases to date “are restricting the economy and bringing down inflation”.

At the same time, he also said if certain economic projections made in March “remain on track, then a rate hike will be appropriate”.

Interest rates have been increased six times since the ECB began to tighten monetary policy in July last year. The bank’s base deposit rate is now 3%.

Inflation across the euro area was estimated to have been 6.9% in March.

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