JACKSON HOLE, Wyoming (Reuters)

The European Central Bank is making “good progress” in cutting inflation back to its 2% target, but success is not yet assured. Restrictive monetary policy is still needed, according to ECB chief economist Philip Lane on Saturday.

The ECB cut interest rates for the first time in June after a record string of hikes. Policymakers are widely expected to cut again on Sept. 12, reducing the deposit rate to 3.5%, a level that remains high enough to curb growth.

“My interim assessment of the effectiveness of ECB monetary policy… is that there has been good progress in delivering the overriding goal,” said Lane at the U.S. Federal Reserve’s annual economic symposium in Jackson Hole.

However, Lane cautioned against premature celebration, stating that projections expect price growth to reach 2% only by the end of 2025. “The return to target is not yet secure,” he remarked, emphasizing that the monetary stance must remain restrictive to ensure a timely return to target inflation.

Markets anticipate that the ECB will cut rates at least in September and December, with some investors also betting on a potential October move due to a quickly deteriorating growth outlook, prompting the bank to support the labor market.

Lane also warned against maintaining excessively tight policies for too long, as that could harm growth and weaken the labor market. “A rate path that is too high for too long would deliver chronically below-target inflation over the medium term and would be inefficient in terms of minimizing the side effects on output and employment,” he stated.