According to a Financial Times report on September 2, European Central Bank Governing Council member Makhlouf said the ECB should not shy away from further rate increases if inflation starts moving in the 'wrong direction.' He said euro-area inflation is hovering above 3% and economic growth has come in slightly stronger than projected before the summer, a combination he described as 'unsettling.' Makhlouf said that even if the benchmark deposit rate climbs to 2.5%, monetary policy would not yet be restrictive for economic activity; genuinely restrictive policy would only emerge once rates exceed 2.75%. He also predicted the ECB would modestly upgrade its euro-area growth forecast this year. About next week's policy decision, Makhlouf said it is not yet clear whether an additional hike would be needed after the rate increase, and argued the ECB should stick to its meeting-by-meeting approach and avoid forward guidance. He added that inflation expectations remain in good shape, with no signs wages are producing second-round inflation effects, and that related risks are under control.
According to a Financial Times report published on September 2, European Central Bank Governing Council member Makhlouf said the ECB should not avoid further rate increases if inflation begins to move in the 'wrong direction.' He noted that euro-area inflation is hovering above 3% and that economic growth has been slightly stronger than forecast before the summer, a combination he described as 'unsettling.'
Interest rates may still have room to climb before they begin to bite. Makhlouf said that even a move in the benchmark deposit rate to 2.5% would not make monetary policy restrictive for economic activity. Genuinely restrictive policy, he argued, would only emerge once rates rise above 2.75%.
He also expects the ECB to make a modest upward revision to its euro-area growth forecast this year.
Regarding next week's meeting, Makhlouf said it remains unclear whether another hike would be needed after the rate increase. He pushed back against providing forward guidance, saying the ECB should stick to its meeting-by-meeting decision-making approach.
On inflation expectations, he said they are in good shape. There are no signs that wages are generating second-round inflation effects, and the related risks are under control.
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