ECBs Lane:Monetary policy decisions will continue to be made on a meeting-by-meeting basis

ECBs Lane gave a speech at a Dinner event. Below are the main commentary on the Economy/Policy.Supply-driven energy shocks hurt euro area growth: Lane said oil-price increases caused by supply disruptions — especially geopolitical events — tend to lower euro area GDP growth by around 0.2–0.3 percentage points over the following years through weaker consumption, investment, and higher uncertainty. Global energy shocks are more damaging than regional shocks: A global shock raises not only energy prices but also the cost of imported goods across supply chains, leading to a bigger hit to growth and stronger inflation pressures than a localized shock like the 2022 Russia-Ukraine energy crisis. Inflation risks come through indirect and second-round effects: Lane stressed that policymakers are closely watching whether higher energy prices feed into broader wage growth, pricing behavior, and inflation expectations, which could make inflation more persistent. Current environment differs from 2022: He noted that inflation, supply bottlenecks, and wage pressures are generally more contained than during the Ukraine shock, although the current Middle East conflict is more global in nature and could still create broader inflation spillovers. Demand backdrop appears softer: Firm surveys and news-based indicators suggest the current shock is occurring in a weaker demand environment than in 2022, which may help limit the pass-through of higher energy costs into broader inflation. Wage pressures remain relatively contained so far: Lane said recent wage agreements do not yet show a significant reaction to the latest rise in energy prices, though the ECB will continue monitoring wage negotiations and pricing behavior closely. ECB policy response depends on persistence of inflation: Lane emphasized that temporary and small inflation deviations may not require a policy response, but a larger or more persistent inflation overshoot would justify a measured or even forceful tightening response. Supply shocks differ from demand shocks for policy: Because energy shocks also weaken demand and real incomes, the ECB may not need to react as aggressively as it would to a demand-driven inflation surge. However, the ECB still must guard against inflation expectations becoming unanchored. ECB remains data dependent: Lane reiterated that monetary policy decisions will continue to be made on a meeting-by-meeting basis, guided by incoming inflation, wage, growth, and financial market data, with no pre-commitment to a specific rate path.The EURUSD moved below the 100 day MA earlier in the European morning session and has waffled above and below that MA through the NA session. The current price is trading just above that MA at 1.1710. The 100 day MA is at 1.1708. The inability to extend a direction away from the moving average suggests that the market traders are unsure the next direction move.