European Central Bank Chief Economist Philip Lane said the bar for directional forward guidance on interest rates is currently high, stressing that the ECB places a very high premium on consensus among policymakers — something that would be difficult to achieve with dot plots.

"We put a very high premium on consensus, would be difficult with dots," Lane said. "I would put high bar on directional forward guidance now."

The contrast shapes how markets read the ECB: unlike the US Federal Reserve, which publishes a quarterly dot plot of individual officials' rate projections, the ECB's Governing Council decides by consensus and releases no equivalent chart, leaving its staff projections and officials' remarks as the main signals on the rate path.

Lane also said it is important that the ECB has an instrument to address multiple equilibria in the bond market — situations in which bond-market dynamics can become self-reinforcing and disconnect from fundamentals. The ECB's toolkit includes the Transmission Protection Instrument, created in 2022 to counter unwarranted, disorderly dynamics in euro-area government bond markets.

On the inflation outlook, Lane said it is informative that underlying inflation has not moved yet, describing it as the usual delayed response. He added that underlying inflation serves as a guide to inflation one year ahead. Underlying measures exclude volatile components such as energy, which is why they tend to react more slowly than headline readings.

Lane noted that energy prices are already reversing, and said that if that continues, headline inflation could fall while underlying inflation rises. He said people should be looking out for whether inflation comes in stronger or weaker than projections. Eurostat's monthly flash estimates for the euro area, read against the ECB's quarterly staff projections, will serve as the recurring checkpoint for that comparison.

Analysis

Lane is keeping his options open on rates. The barometer for traders is how inflation comes in relative to the ECB's projections, especially if headline and underlying inflation start moving in opposite directions.

Lower energy prices could bring down the headline rate while the earlier shock is still feeding through to underlying inflation. Lane sees underlying inflation as a guide to where inflation could be a year from now. If that measure starts coming in above projections, a softer headline print alone may give the ECB little reason to signal an easier policy path.