FX.co ★ Philip Lane warns Europe about inflation stuck above 3%

The European Central Bank (ECB) must be ready for eurozone inflation to exceed target levels and to settle above three percent in the near term, ECB chief economist Philip Lane warned, according to Bloomberg. Mr. Lane said the key reason for the persistent inflationary pressure is the long‑term fallout from the geopolitical crisis in the Middle East, which has significantly harmed Europe’s manufacturing and services sectors.

Philip Lane noted that despite the recent peace agreement between the US and Iran and the resumption of navigation through the strategic Strait of Hormuz, global crude oil prices have not returned to pre‑crisis levels. He said four months of extremely high energy costs have already set off an inertia‑driven inflationary process in the European economy. Mr. Lane added that oil is unlikely to fall sharply in the foreseeable future, remaining in the current range of about $80–$81 per barrel.

The macroeconomic picture is a serious concern for the ECB governing board. ECB President Christine Lagarde stated firmly that the current rise in consumer prices must be countered by all available monetary tools. Indeed, once inflation gets out of control, it will be extremely difficult to bring it back to target. Christine Lagarde called the ongoing inflationary trend absolutely unacceptable and destructive for both ordinary Europeans’ purchasing power and large business investment plans.