ECB’s Lane: Monetary policy should not remain restrictive for too long

• The job is not done yet on inflation, services prices still need to come down
• Inflation is close to the 2% target
• Barring new geopolitical or political risks, a large part of the final stage in bringing inflation back to 2% target will be completed next year
• Monetary policy must respond to both downside and upside risks to inflation
• We have been clear that we are moving on a meeting-by-meeting basis
• Don’t see spread fragmentation that would dissuade investors for the time being
• Full transcript

The remarks are consistent with their recent communique. If anything, it reaffirms a rate cut for December. The question now after the softer PMI data last week though is will the ECB move by 50 bps instead? The inflation numbers later this week will provide the next clue for markets.

This article was written by Justin Low at www.forexlive.com.