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While speaking in an interview on Italy’s Sky TG24 during Saturday, the European Central Bank’s (ECB) Chief Economist Philip Lane said, as per the Bloomberg, that policies are “in good shape” for the baseline scenario of improving conditions over the next one or two years, but further rate cuts can’t be ruled out.

Key quotes

“Under the most likely scenario, we think the current policies are in good shape.”

“The scenarios where “more dramatic policies” are required such as “a severe negative shock, a big recession” are not the baseline case.”

“If it is necessary to put the rate lower, we will be prepared to do so.”

“It’s a very important message and this goes back to the wider discussion.”

“Of course, everyone agrees at some level the negative rate will not be helpful. But our assessment is we are not at that level now.”

“We do not find it acceptable to have inflation around 1.6%. So 1.6% is not close to 2%. That is important.”

“To argue that under zero circumstances there can be a sovereign debt restructuring is not plausible.”

FX implications

Although the news follows the ECB’s push to shift the market’s attention off further easy money policies, especially after the recent speech from the President Christine Lagarde, there was no major reaction to the headlines. The EUR/USD pair trades near 1.1020 by the press time of early Monday morning in Asia.