Gabriel Makhlouf, a European Central Bank policymaker, expressed his comfort with the possibility of just one more interest rate cut this year. Despite market expectations of further rate reductions, Makhlouf emphasized the need for more time to build confidence in the trajectory of inflation towards the ECB’s 2% target.
During an interview at the ECB’s Forum on Central Banking in Sintra, Portugal, Makhlouf took a cautious approach towards potential rate cuts. While acknowledging the likelihood of future reductions, he warned against rushing into multiple cuts simultaneously. Makhlouf suggested that while another rate cut might be warranted, implementing two cuts too soon could be premature.
Despite the ECB’s efforts to address inflation concerns, the recent data on inflation in the eurozone revealed a slowdown to 2.5% in June. Makhlouf acknowledged the positive direction indicated by the data but highlighted the persistent challenge of services inflation. With services inflation posting a consecutive 4.1% increase, Makhlouf stressed the importance of monitoring wages as a key driver of prices in the services sector.
While acknowledging the potential for lower interest rates in the future, Makhlouf emphasized the need to allow time for data analysis. He anticipated that interest rates would decline further as long as the ECB continued to make progress towards achieving its 2% inflation target sustainably. Makhlouf’s cautious outlook underscored the importance of a gradual and data-driven approach to monetary policy decisions.
Gabriel Makhlouf’s remarks on the future of European Central Bank interest rates reflect a balanced assessment of the current economic conditions and the challenges ahead. As policymakers navigate the complex landscape of inflation dynamics and economic recovery, a cautious and deliberate approach to monetary policy will be crucial in achieving the ECB’s inflation targets in a sustainable manner.