ECB chief economist Lane sees eurozone wages growth slowing  

Also, traders are betting the Bank of England could beat its European and US peers to interest rate cuts

ECB chief economist Philip Lane thinks inflation 'should stabilise' at around 2% by 2025.

European Central Bank chief economist Philip Lane said pay growth in the eurozone is returning to more normal levels.

“It’s desirable and inescapable that we do have several years of wage increases above a normal level,” Mr Lane said in an ECB podcast. “But what we need to make sure is it basically returns to normal. It’s a normalisation process. And this is where we’re looking at this, and I would say we’re confident that it’s on track," he said. 

Mr Lane also noted “good progress” to contain inflation.

“In next year and the year after inflation should stabilise around our 2% target,” he said. “This is a good baseline. And essentially what we decided is, in these weeks from that meeting, we need to keep on checking this assessment. 

Mr Lane added:

And what I would say is if this assessment is confirmed, then we will start looking more closely at reversing some of the rate increases we’ve made.

Meanwhile, traders are betting the Bank of England could beat its European and US peers to interest rate cuts, a turnaround from expectations it would be a laggard in 2024. Money markets have raised wagers on easing at its next monetary-policy decision, putting the probability of a cut at 20%, compared to less than 10% for the US Federal Reserve and ECB. 

That follows remarks last week by governor Andrew Bailey that rate cuts were in play at future meetings as inflationary risks have eased. 

It’s a big shift in market positioning. The UK had been expected to lag peers as inflation remained stubbornly high last year despite the fastest hiking cycle in decades. 

At the start of 2024, money markets favored two cuts from the Fed and ECB by their third meeting of the year, but only one from the Bank of England. 

Bloomberg