(Bloomberg) -- The European Central Bank doesn't see a recession in the euro area and has all the tools it needs to drive below-target inflation toward its aim, according the institution's chief economist.
Philip Lane, who joined the Executive Board in June, said that “substantial accommodation is still required” as price growth in the region remains lackluster amid risks threaten the growth outlook. The ECB has a “variety of tools” and will choose the most suitable one if needed, he said in a Twitter Q&A on Tuesday.
The ECB is expected to cut interest rates as soon as this summer. The deposit rate is already at a record low minus 0.4% and the central bank only capped its 2.6 trillion-euro ($3 trillion) quantitative-easing program at the end of last year. Any policy response would follow more than a year of economic weakness in the region as trade tensions weighed on the manufacturing and export-heavy economy.
The Irishman said pro-active measures -- including negative interest rates -- can help to ensure inflation makes progress towards the ECB's aim, and told skeptics that keeping borrowing costs negative for a “temporary period” will allow them to rise again in the future.
He also issued praise for his incoming new boss, current IMF chief Christine Lagarde, who takes over from Mario Draghi this autumn.
--With assistance from Katerina Petroff.
To contact the reporters on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net;Kristie Pladson in Frankfurt at kpladson@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Brian Swint
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