Philip Lane details ECB monetary policy in Frankfurt speech
Philip R. Lane, ECB Executive Board member, delivered a keynote speech on October 6, 2025, in Frankfurt am Main, outlining the ECB's monetary policy strategy and current inflation outlook. He emphasized the symmetric 2% inflation target over the medium term and a flexible, data-dependent approach to future decisions. The speech highlighted projections showing inflation stabilizing near the target amid ongoing disinflation.
In his address at the ECB Conference on Monetary Policy 2025: bridging science and practice, Philip R. Lane explained the ECB's strategy, rooted in the updated monetary policy statement. The Governing Council aims for 2% inflation over the medium term, with a symmetric commitment treating deviations in either direction as equally undesirable. As Lane stated, "The Governing Council considers that price stability is best maintained by aiming for two per cent inflation over the medium term. The Governing Council’s commitment to this target is symmetric." This point target provides clarity for inflation expectations, unlike a zonal approach.
The strategy incorporates a medium-term orientation, allowing flexibility for short-term deviations due to shocks, lags in transmission, and uncertainty. Decisions integrate the most likely inflation path, risks, and scenario analyses, acknowledging elevated uncertainty from structural shifts like geopolitics, digitalization, and climate threats. Lane noted that large, sustained deviations require forceful action to prevent de-anchored expectations.
Turning to the outlook, September 2025 staff projections show headline inflation at 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027—more benign than the 2021-2024 averages of 2.6%, 8.4%, 5.4%, and 2.4%. Non-energy inflation, a key underlying measure, is expected at 2.5% in 2025, declining to 2.0% in 2026 and 1.9% in 2027, driven by decelerating wage growth from 3.4% to 2.7%, euro appreciation, energy spillovers, and fading fiscal subsidy reversals. Services inflation projects at 3.4% in 2025, easing to 2.3% by 2027; food at 2.9% in 2025, stabilizing at 2.3%; non-energy industrial goods remain low around 0.6-0.8%.
Energy inflation contrasts sharply, projected at -1.6% in 2025 and -1.1% in 2026, before jumping to 2.4% in 2027 due partly to the EU Emissions Trading System 2 introduction. This follows extreme surges of 13.0% in 2021 and 37.0% in 2022, with recent deflation at -2.2% in 2024.
For near-term policy, Lane advocated a data-dependent, meeting-by-meeting approach without pre-committing to rate paths. Decisions will assess inflation dynamics, transmission strength, and risks like trade tensions, euro strength, and geopolitical events. Downside risks include stronger euro appreciation and trade fragmentation lowering demand; upside risks encompass supply chain disruptions and higher defense spending. Echoing ECB President Christine Lagarde, Lane stressed agility: "We must remain agile, and ready to respond to the data as they come in." The views expressed are Lane's personal ones, not the Governing Council's collective stance.