European Central Bank (ECB) Governing Council member Gabriel Makhlouf stated on Thursday that the central bank cannot rule out further policy rate increases in upcoming meetings. He noted that interest rates are currently within a neutral range and that the market understands the ECB's commitment to achieving its 2% inflation target. Makhlouf also mentioned that he is not observing any concerning signs of second-round inflation effects emerging in the near term, but risks to inflation remain on the upside.
Makhlouf emphasized that the outlook remains uncertain and that the ECB must focus on its medium-term target of 2%. This stance suggests a hawkish bias, indicating a readiness to continue tightening monetary policy if necessary to combat inflation.
However, in a separate statement on Friday, Makhlouf also acknowledged that significantly higher interest rates could damage economic growth. This highlights a balancing act the ECB faces between controlling inflation and supporting economic activity. ECB President Christine Lagarde also commented that the current inflation shock is proving to be longer-lasting, partly due to the ongoing conflict in the Middle East which is expected to maintain volatility and pressure on energy prices.
