In a keynote speech at the Asian Monetary Policy Forum, European Central Bank Executive Board member Philip R. Lane argued that Asia now matters substantially more for the euro area than a decade ago, with Asian macroeconomic shocks having spillovers close to those of US shocks. He linked that shift to the euro area's high trade openness, deeper integration into Asian-centred supply chains and China's growing weight in global output, trade and industrial production. The remarks were presented as Lane's own analytical assessment rather than a Governing Council decision. Lane said the euro area is losing export market share across major markets, especially in traditional medium-high technology industries, while imports have become more concentrated in Asia, increasing exposure to supply disruption, geopolitical tensions and price shocks. At the same time, cheaper Chinese imports have helped restrain euro area goods inflation, even as higher European energy costs and a stronger euro against the renminbi have weakened price competitiveness. He also described the European Central Bank's model suite, including ECB-Global, ECB-BASE, MCMS-ONKIO and DREAM, which staff use in projections and scenarios to assess shocks such as Middle East energy disruptions, tariffs, China's industrial rise and rare earth export controls. His main policy point was that monetary policy cannot react mechanically to exchange rates or foreign interest-rate moves, because the appropriate response depends on the underlying shock and its effect on euro area inflation and activity.
European Central Bank2026-05-22
European Central Bank's Lane says Asia spillovers now rival US shocks for the euro area and outlines global modelling toolkit
The European Central Bank’s Philip R. Lane told the Asian Monetary Policy Forum that Asian macroeconomic shocks now have spillovers to the euro area comparable to those from the United States, reflecting greater trade openness, integration into Asian supply chains and China’s rising global weight. He noted that the euro area is losing export market share, faces higher exposure to Asia-centric supply and price shocks, and relies on ECB models to assess external shocks. Lane stressed that monetary policy should not respond mechanically to exchange rates or foreign interest rates but instead to the nature of the underlying shock and its impact on euro area inflation and activity.