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ECB must keep policy easy even after pandemic, Lane says

·1-min read
FILE PHOTO: European Central Bank Chief Economist Philip Lane speaks during a Reuters Newsmaker event in New York
FILE PHOTO: European Central Bank Chief Economist Philip Lane speaks during a Reuters Newsmaker event in New York

FRANKFURT (Reuters) - The European Central Bank must keep its policy sufficiently easy, even after the damage wrought by the coronavirus pandemic is repaired, to ensure euro zone inflation heads back to its target, chief economist Philip Lane said on Tuesday.

Euro zone prices have fallen for two consecutive months despite massive stimulus by the ECB and are not expected to grow anywhere near its inflation goal of just under 2% for years to come.

Lane acknowledged that the pandemic has aggravated an already challenging situation and pledged that the ECB would keep borrowing costs suitably low even after the crisis is over.

"Once we have returned towards the pre-pandemic inflation path, we have to ensure that our monetary policy stance is appropriately calibrated in order to ensure timely and robust convergence to our medium-term inflation aim," Lane told an online event.

He noted the market had already pushed back the date of the ECB's first rate hike to August 2024, and analysts were also expecting the ECB's regular bond purchases, which started in 2015 and have totalled nearly 3 trillion euros, to last longer.

In addition, the ECB is on course to buy a further 1.35 trillion euros worth of assets by next June to keep markets calm in the face of an outbreak that brought the euro zone economy to a virtual standstill in the spring and is now seeing a second wave of COVID-19 infections.

"We are seeing some resurgence and...some degree of new restrictions," Lane said in response to a question. "These weeks are extremely critical not only for the public health issue but also for consumer confidence and investor confidence."

(Reporting by Francesco Canepa; Editing by Balazs Koranyi/Mark Heinrich)