April 24, 2025 • 8 mins
Philip Lane, Chief Economist at ECB talks about whether investors are turning bullish on Europe despite trade uncertainty with the US. He speaks with Bloomberg's Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
So here's the LISUS this morning, the ECB warning tarras
may be more disinflationary than inflationary for Europe. This after
President Trump said he's confident of reaching a trade deal
with the EU. Joining us around the table here in
our studio in Washington, d C. The Chief economist of
the European Central Bank, Philip Blank. Philip is good to
see you, sir, Good morning, Thanks for being able to
hear in Washington. So the Government Council meeting, I imagine,
(00:29):
was very different this time around than a number of
months ago when you walked into that room and presented
changes to the economy. What did you tell a team?
Speaker 1 (00:36):
Sure, I mean I think it was a gear change
for several reasons. So of course, our core business has
been to try and get inflation back down from a
high number to our targets. So I think there was
a milestone in this meeting in the sense of the
most recent data had come in quite low. What we'd
been waiting for services inflation to kind of drop, and
(00:59):
it has been dropped. And then we had surveys showing
that basically the weight dynamic this year and in twenty
six is lower than we expected. So basically, if you like,
if you clear the table about the historic issue, are
we safely bringing inflation back to target? I think a
lot it's not entirely settled, but a lot of it
(01:19):
is settled. So the gear change was of course, now
we have new things to talk about, and really since
all the way back to last summer, trade policy uncertainty
has been part of what we've had to talk about.
But we still have trade policy uncertainty, but we also
have trade policy news. You know, lots has happened that
(01:42):
the and then the other element of what we've seen
is of course, and that happened, by the way, like
a day or two before our March meeting, was a
German break through and fiscal policy, so we already had
that if you like, in the early incarnation at the
March meeting. We know more now, but it's still, you know,
(02:02):
in terms of what the other European countries are going
to do, it's something that's still in discussion. So what
I would say if you put all of that together,
and I think you're probably hearing this from various colleagues
and other people this week, is if I take a
longer term perspective, and the IMF in their publications this week,
a lot of the data go out to twenty thirty.
(02:25):
If I take a twenty thirty perspective, you know, I
think there's a lot of grants to have a renewed
optimism that essentially, with more fiscal support, the credibility of
delivering our two percent target on a kind of long
term basis is stronger. The case for the European economy
to be more resilient, to grow from a domestic source,
(02:47):
not just from running a big export machine, is more credible.
But of course we have to navigate from where we
are now. Where As you said in your intro, immediately
in the short term, the way it's playing out with
euro appreciation, with a big drop in energy prices, the
(03:09):
disinflatory forces are there. But I would say maybe the question,
you know, I wouldn't load it all on the trade policy.
What we also see now as a portfolio shift. So
there's a clear portfolio shift going on, which is I
think the way you can reconcile euro appreciation in the
middle of this trade discussion.
Speaker 2 (03:29):
As you know, Philip, that sort of begs the question
why you don't act more aggressively. Does that give you
the space to act more preemptively.
Speaker 1 (03:35):
Well, I think a very important narrative we had last week,
and it was repeated threat to Manto policy statement was resilience.
What we're seeing is the European economy growing. Two years
ago it was kind of more stagnating. So we said
the European economy is going to recover. We saw, you know,
modest but still market recovery last year is around zero nine.
(03:59):
We have zero nine written down in March for this year,
and that's basically because with incomes going up, consumption shough
to cover with our multi policy and the general improvement
of the economy, investments should recover with more government support.
So all the domestic engines are there. So what you
(04:20):
have to think about is all of that, if you like,
is saying that the economies should be growing, even marking
down some trait negative and this is why we're not
in a situation where we see some dramatic change in
the external environment or in fries pressures and so on.
So steady is okay? Hold on a second, are you
(04:42):
saying that what we've seen with respect to US policy
and the uncertainty isn't increasing the chance of recession materially
for the euroregion. Well, I mean, I think our overriding seam,
of course is uncertainty. And let's not get ahead of
ourselves in terms of being too sure about any any
path for the ecomon But I think the message is
but it's not me dreaming it up. If you look
(05:05):
at the external watchers, if you look at the IMF,
it's fairly modest mark dance on the growth trade for
the European economy. The US, of course has a major
trade policy issue all with the world. We have a
trade policy issue with the US. The US is an
important trading partner, but it's not our only trading partner,
(05:27):
so directionally it is a markdown. There is a markdown,
but it's important to say it's a markdown from a
growth trade around zero nine to a little bit less.
Let's see in the coming weeks how much less. And
I think if you look at the surveys this week,
the surveys have elements of people being concerned, but they
also have elements Right now, we're busy. Manufacturing is a
(05:50):
bit busier than it was. That could be a little
bit of front running of taris for sure, but it's
also remember the recovery narrative. Europe has been stagnating. The
American economy has grown quickly, So if you like, in
terms of if there is room for the American ecomomy
to decelerate, and then trade policy is adding to that,
(06:10):
what I'm saying to you is essentially the baseline for
Europe was to grow a bit more quickly, and so
the resilience is there. You can take a trade hit
without going to using that word which I of that
you mentioned. You mentioned, of course that Europe has more
trading partners.
Speaker 2 (06:29):
Than the United States.
Speaker 1 (06:30):
How concerned are you that if the walls keep going
up in the United States, China will have to just
dump somewhere. It's going to be on the continent. So
I think directly an element with that must be you know,
must be expected. But I think you know, China fully
understands that. You know, if you listen to their policy
(06:51):
announcements they're going to do. Their focus is on improving
domestic demand. So in terms of the re orientation from
the US, fairmount to domestic demand some amount to around
the world. But I think also China understands it's a
large economy and a bit of restraint in exporting may
(07:13):
make sense.
Speaker 2 (07:14):
For the twenty seconds left, I just wanted to jump in.
Olie Rain was busy this morning, your governing council partner,
and he made the point that we should be open
to larger interest rate cuts. Is that a position that
you and the team agree with?
Speaker 1 (07:25):
Philosophically, we don't pre commit to any rate path, of course,
and so this is why again it's important, and I
think the Government Council, I think, tries hard to maintain
this is. You can express that in different ways, and
in particular there's no reason to say we're always going
to do the default twenty five. Philosophically I agree with that. Okay,
(07:48):
what I said to you earlier on is right now
the growth performance I'm sure to be marked down. It's
still a growing economy with inflation I think to the downside.
But we don't need too dramatic
Speaker 2 (08:00):
About Philip Lane, the Chafe economist of the e c
B
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
So here's the LISUS this morning, the ECB warning tarras
may be more disinflationary than inflationary for Europe. This after
President Trump said he's confident of reaching a trade deal
with the EU. Joining us around the table here in
our studio in Washington, d C. The Chief economist of
the European Central Bank, Philip Blank. Philip is good to
see you, sir, Good morning, Thanks for being able to
hear in Washington. So the Government Council meeting, I imagine,
(00:29):
was very different this time around than a number of
months ago when you walked into that room and presented
changes to the economy. What did you tell a team?
Speaker 1 (00:36):
Sure, I mean I think it was a gear change
for several reasons. So of course, our core business has
been to try and get inflation back down from a
high number to our targets. So I think there was
a milestone in this meeting in the sense of the
most recent data had come in quite low. What we'd
been waiting for services inflation to kind of drop, and
(00:59):
it has been dropped. And then we had surveys showing
that basically the weight dynamic this year and in twenty
six is lower than we expected. So basically, if you like,
if you clear the table about the historic issue, are
we safely bringing inflation back to target? I think a
lot it's not entirely settled, but a lot of it
(01:19):
is settled. So the gear change was of course, now
we have new things to talk about, and really since
all the way back to last summer, trade policy uncertainty
has been part of what we've had to talk about.
But we still have trade policy uncertainty, but we also
have trade policy news. You know, lots has happened that
(01:42):
the and then the other element of what we've seen
is of course, and that happened, by the way, like
a day or two before our March meeting, was a
German break through and fiscal policy, so we already had
that if you like, in the early incarnation at the
March meeting. We know more now, but it's still, you know,
(02:02):
in terms of what the other European countries are going
to do, it's something that's still in discussion. So what
I would say if you put all of that together,
and I think you're probably hearing this from various colleagues
and other people this week, is if I take a
longer term perspective, and the IMF in their publications this week,
a lot of the data go out to twenty thirty.
(02:25):
If I take a twenty thirty perspective, you know, I
think there's a lot of grants to have a renewed
optimism that essentially, with more fiscal support, the credibility of
delivering our two percent target on a kind of long
term basis is stronger. The case for the European economy
to be more resilient, to grow from a domestic source,
(02:47):
not just from running a big export machine, is more credible.
But of course we have to navigate from where we
are now. Where As you said in your intro, immediately
in the short term, the way it's playing out with
euro appreciation, with a big drop in energy prices, the
(03:09):
disinflatory forces are there. But I would say maybe the question,
you know, I wouldn't load it all on the trade policy.
What we also see now as a portfolio shift. So
there's a clear portfolio shift going on, which is I
think the way you can reconcile euro appreciation in the
middle of this trade discussion.
Speaker 2 (03:29):
As you know, Philip, that sort of begs the question
why you don't act more aggressively. Does that give you
the space to act more preemptively.
Speaker 1 (03:35):
Well, I think a very important narrative we had last week,
and it was repeated threat to Manto policy statement was resilience.
What we're seeing is the European economy growing. Two years
ago it was kind of more stagnating. So we said
the European economy is going to recover. We saw, you know,
modest but still market recovery last year is around zero nine.
(03:59):
We have zero nine written down in March for this year,
and that's basically because with incomes going up, consumption shough
to cover with our multi policy and the general improvement
of the economy, investments should recover with more government support.
So all the domestic engines are there. So what you
(04:20):
have to think about is all of that, if you like,
is saying that the economies should be growing, even marking
down some trait negative and this is why we're not
in a situation where we see some dramatic change in
the external environment or in fries pressures and so on.
So steady is okay? Hold on a second, are you
(04:42):
saying that what we've seen with respect to US policy
and the uncertainty isn't increasing the chance of recession materially
for the euroregion. Well, I mean, I think our overriding seam,
of course is uncertainty. And let's not get ahead of
ourselves in terms of being too sure about any any
path for the ecomon But I think the message is
but it's not me dreaming it up. If you look
(05:05):
at the external watchers, if you look at the IMF,
it's fairly modest mark dance on the growth trade for
the European economy. The US, of course has a major
trade policy issue all with the world. We have a
trade policy issue with the US. The US is an
important trading partner, but it's not our only trading partner,
(05:27):
so directionally it is a markdown. There is a markdown,
but it's important to say it's a markdown from a
growth trade around zero nine to a little bit less.
Let's see in the coming weeks how much less. And
I think if you look at the surveys this week,
the surveys have elements of people being concerned, but they
also have elements Right now, we're busy. Manufacturing is a
(05:50):
bit busier than it was. That could be a little
bit of front running of taris for sure, but it's
also remember the recovery narrative. Europe has been stagnating. The
American economy has grown quickly, So if you like, in
terms of if there is room for the American ecomomy
to decelerate, and then trade policy is adding to that,
(06:10):
what I'm saying to you is essentially the baseline for
Europe was to grow a bit more quickly, and so
the resilience is there. You can take a trade hit
without going to using that word which I of that
you mentioned. You mentioned, of course that Europe has more
trading partners.
Speaker 2 (06:29):
Than the United States.
Speaker 1 (06:30):
How concerned are you that if the walls keep going
up in the United States, China will have to just
dump somewhere. It's going to be on the continent. So
I think directly an element with that must be you know,
must be expected. But I think you know, China fully
understands that. You know, if you listen to their policy
(06:51):
announcements they're going to do. Their focus is on improving
domestic demand. So in terms of the re orientation from
the US, fairmount to domestic demand some amount to around
the world. But I think also China understands it's a
large economy and a bit of restraint in exporting may
(07:13):
make sense.
Speaker 2 (07:14):
For the twenty seconds left, I just wanted to jump in.
Olie Rain was busy this morning, your governing council partner,
and he made the point that we should be open
to larger interest rate cuts. Is that a position that
you and the team agree with?
Speaker 1 (07:25):
Philosophically, we don't pre commit to any rate path, of course,
and so this is why again it's important, and I
think the Government Council, I think, tries hard to maintain
this is. You can express that in different ways, and
in particular there's no reason to say we're always going
to do the default twenty five. Philosophically I agree with that. Okay,
(07:48):
what I said to you earlier on is right now
the growth performance I'm sure to be marked down. It's
still a growing economy with inflation I think to the downside.
But we don't need too dramatic
Speaker 2 (08:00):
About Philip Lane, the Chafe economist of the e c
B
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