ECB’s Lane backs May rate hike with size depending on data

© Reuters. FILE PHOTO: A view shows the logo of the European Central Bank (ECB) outside its headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker

FRANKFURT (Reuters) -The European Central Bank’s (ECB) chief economist on Tuesday backed a further interest rate increase at the ECB’s next meeting but said its size would depend on incoming data, especially a survey of euro zone banks.

The ECB is expected to raise rates for a seventh straight meeting on May 4 in a bid to bring down stubbornly high inflation in the euro zone, with policymakers converging on a 25-basis-point hike, sources with direct knowledge of the discussion have told Reuters.

Philip Lane, who is in charge of making policy proposals at the ECB, said a rate hike was “the baseline” after tensions in the banking sector receded, supply bottlenecks eased and gas prices fell.

“As of now, two weeks away, I think the baseline is that we should increase interest rates in May but what we do in terms of scale, I’m not going to set a default number,” Lane said on Bloomberg TV.

He said the size of the hike would depend on data including a preliminary estimate of the inflation rate in April, which will come out a day before the meeting, and GDP data for the first quarter of the year scheduled for the Friday before.

But Lane singled out the ECB’s own Bank Lending Survey (BLS), in which banks are asked about the supply and demand of credit, as “the most important”.

“That’s the most important survey for us in understanding whether we are indeed seeing further tightening of credit conditions,” Lane added.

The next BLS is scheduled to be published on May 2, along with Eurostat’s flash inflation estimate for April.