ECB will include trade scenarios in June projections, Lane says

The European Central Bank will publish additional scenarios for the euro-zone economy alongside next month’s quarterly outlook in an attempt to capture the possible effects of the current trade turmoil, according to Chief Economist Philip Lane.

In remarks at a conference organised by the Federal Reserve, the Irish official said such a step is warranted in some cases, citing the pandemic and Russia’s attack on Ukraine as examples.

“In the near term, the ongoing uncertainty about US tariff policies means that alternative scenarios will also be included in the June macroeconomic projections exercise,” Lane said Friday in Washington.

The remarks come with investors all but sure that the ECB will cut borrowing costs for an eighth time in June as inflation heads back toward its 2% target. Despite growth quickening at the start of the year, the economy is also a worry as uncertainty over US President Donald Trump’s plans poses headwinds for investment and consumption.

As policymakers seek to plot a course through what they all deem extremely high uncertainty, Irish central-bank chief Gabriel Makhlouf this week offered three scenarios for Europe — from a short-lived tariff threat to enduring tensions that affect other big trading partners like China.

Lane’s comments on how best to communicate monetary policy included a discussion on whether it would be appropriate to introduce a version of the Fed’s so-called dot plot, which comprises governors’ anonymous submissions of their expectations for borrowing costs in the future.

Lane joined ECB officials including Bundesbank President Joachim Nagel in rejecting the idea.

“Such an exercise would create unwarranted expectations about the future rate path,” he said. “Procedurally, publishing a conditional rate path would also be awkward in the context of a staff-led projections exercise that is based on the market rate path.”

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