FRANKFURT: Inflation in the eurozone could stabilise around the European Central Bank’s (ECB) 2% target after the Covid-19 pandemic, paving the way for an exit from ultra-loose monetary policy, chief economist Philip Lane said.

       While the central bank currently predicts that price growth will fall below that threshold in 2023 and 2024, Lane told Lithuania’s Verslo Zinios in an interview that “it’s also possible that we may enter a world where inflation stabilises around 2%” because some of the headwinds that depressed prices before the pandemic won’t return.

       At the same time, Lane argued that a scenario in which consumer prices rise at a rate that’s persistently and significantly above the ECB’s target, which would require a “serious tightening” of monetary policy, is “less likely.”

       “In the middle scenario where inflation stabilises at 2%, then clearly over time we would normalise monetary policy,” Lane said.

       “The policies we need to fight very low inflation would no longer be needed if inflation were stable around 2%.”

       Inflation in the eurozone reached a record 5% in December, though the ECB has argued that price pressures will ease in the course of this year as pandemic-related factors like supply-chain bottlenecks and statistical factors fade away. — Bloomberg