While giving a virtual guest lecture at the University of Stanford, European Central Bank (ECB) Chief Economist Philip Lane noted that while inflation has declined at a faster pace than the ECB had initially expected, policy transmission continues to lag, and tightening effects from previous rate increases continue to unfold.

Key highlights:

• The ECB is not pre-committing to any particular rate path.
• The ECB will continue to follow a data-dependent approach.
• Expectations of future inflation continue to normalize, and leaving nominal rates unchanged implies a mechanical increase in real rates.
• Policy rates will stay restrictive for as long as needed.
• Inflation has declined more quickly than expected.
• Wage growth is moderating, but remains elevated.
• The next phase of the disinflation process likely more gradual.