Philip Lane, Chief Economist at the European Central Bank (ECB), emphasized the necessity of adopting a balanced approach to interest rates, urging policymakers to avoid excessive caution when considering rate hikes or cuts and to seek a “middle path” between acting too quickly and moving too slowly.

Speaking in Washington, D.C., Lane stated that a balanced strategy, which does not overly focus on the risks of rate increases or decreases, would be the most appropriate course of action. He noted that inflation might take longer than expected to reach the desired target.

According to The Wall Street Journal, Lane warned that keeping borrowing costs high for too long could push inflation below the ECB’s 2% target, which would then require larger rate cuts to bring it back up.

He added that an overly cautious stance could entrench a low-inflation dynamic, necessitating a stronger response later to ensure inflation returns to the 2% target.

This comes after the ECB recently cut its key interest rates for the fifth time since it began easing monetary policy in June of last year. Investors anticipate further rate cuts in upcoming Governing Council meetings as inflation slows and economic growth remains weak.