Philip Lane, the European Central Bank's chief economist, indicated in an interview with the Japanese business daily Nikkei that the ECB is likely to revise its inflation and growth forecasts at the bank's next quarterly update. The comments, published on Tuesday, link a worsening macroeconomic outlook to developments stemming from the Middle East conflict.
"There are several factors related to the Iran war that show that the macroeconomic outlook has gotten worse," Lane told Nikkei. He added that oil prices are expected to remain higher for a longer stretch than the assumptions the ECB used in March.
Lane acknowledged a mitigating element in the form of increased U.S. natural gas supplies, which he said could help cushion the energy market. However, he maintained that, on balance, the net effect has been upward pressure on inflation. "On net, I still think that there has been upward pressure on inflation," he said.
Pointing to the ECB's regular projection cycle, Lane said: "We are likely to make a further upward adjustment to the inflation forecast in June." The bank issues revised growth and inflation projections every three months, with the next scheduled revision set for June 11.
The comments frame the projection update as a response to evolving geopolitical risks and their implications for energy markets and price dynamics. Lane's remarks confined the assessment to the factors he identified, noting both a potential dampening force from U.S. natural gas flows and the prevailing upward influence on inflation tied to oil and the conflict-related developments.
Key takeaways
- The ECB is expected to revise inflation and growth forecasts at its quarterly update, reflecting a darker outlook linked to the Middle East conflict.
- Oil prices are seen as likely to remain elevated beyond the assumptions in the ECB's March projections, contributing to higher inflation.
- Increased U.S. natural gas supplies may offer some relief to energy markets, but Lane said the net effect has been upward pressure on inflation.
Context on timing
The ECB revises its macroeconomic projections every three months. The next scheduled release of updated growth and inflation forecasts is June 11.
Impacted areas
- Energy markets - notably oil and natural gas supply dynamics referenced by Lane.
- Inflation expectations - as the bank prepares to adjust its inflation forecast upward.
- Monetary policy and financial planning - given the ECB's role in setting expectations through its regular forecast cycle.