ECB Signals Potential for Higher Interest Rates as Euro Zone Shows Resilience
ECB's Assessment of Interest Rates and Economic Resilience
ECB Chief Economist's Statement
FRANKFURT, June 18 (Reuters) - The European Central Bank's chief economist Philip Lane said on Thursday the euro zone's economy may now be able to withstand slightly higher interest rates without losing steam.
Neutral Rate Range Adjustment
Lane said the upper end of the neutral range for the ECB's benchmark rate, which neither stimulates nor curbs growth, has risen from 2.25% to 2.50% based on bond market prices.
Implications for Future Monetary Policy
His comments may be taken as a sign the ECB, which raised borrowing costs last week to stem an energy-fuelled rise in inflation, can afford to tighten further without hurting the economy -- although Lane stressed he was referring to the longer term.
Lane's Remarks on Neutral Rate Calculations
"I would view our calculations of neutral as relevant for the endpoint when the shock is over," Lane told a financial event in London. "We look at a range of models of neutral and the upper end of that range we think has crept up from 2.25 to 2.50."
Recent ECB Policy Actions
The ECB raised its benchmark deposit rate to 2.25% from 2% last week and left the door open to more tightening to prevent a surge in fuel costs caused by the Iran war from spreading to other prices.
Market Reactions and Economic Context
Bond yields have risen sharply in the euro zone since Germany unveiled plans to spend more on the military and infrastructure in the winter of last year.
Reporting Credits
(Reporting by Balazs Korany; Writing by Francesco CanepaEditing by Tomasz Janowski, William Maclean)
