ECB chief economist Philip Lane warned that the central bank could still raise rates if the impact of inflation lasts longer than expected and tightening risks persist after the March pause.
Philip Lane, the European Central Bank’s chief economist, warned that interest rates could still rise if eurozone inflation proves more persistent than policymakers currently expect, leaving the door open for further tightening after the ECB left borrowing costs unchanged in March.
“If the effects of inflation persist for a long time, the European Central Bank will consider raising interest rates,” the Governing Council member said, emphasizing that the fight against higher-than-target price increases is far from over.
His comments echoed recent guidance from ECB President Christine Lagarde, who told the Financial Times that “if inflation is expected to deviate significantly and sustainably from target, the response must be suitably strong or sustained,” suggesting that rate hikes would remain on the table if price pressures accelerate again.
The ECB left its three main interest rates unchanged in its March policy decision, acknowledging that the Middle East conflict is creating an upside risk to inflation through rising energy costs, but reiterated its “determination to ensure that inflation stabilizes at the 2% target over the medium term.”
The central bank’s latest forecasts show headline inflation will average 2.6% in 2026 and hover around 2% in 2027 and 2028, but officials including Mr Lane warned that wage trends and business pricing plans will be closely monitored “on a meeting-by-meeting basis” to determine whether these forecasts remain reliable.
Lagarde also stressed that a “self-reinforcing mechanism” could take hold if inflation expectations move away from target, warning that the risk of de-anchoring would “become serious” without a sufficiently decisive response, a stance that has made markets wary of declaring a definitive end to the rate-hike cycle.
Money market traders are currently pricing in two or three rate hikes by the ECB by the end of the year, which would bring the key policy rate to a range of around 2.50% to 2.75%, but the timing is seen as highly sensitive to future inflation trends and developments in energy markets.
For crypto investors, Lane’s signal that interest rates could still rise if inflation persists adds another macro variable to watch alongside the European inflation data and central bank communications that crypto.news has tracked in previous coverage of the ECB’s decision and its spillover to the Bitcoin and Ethereum markets.
