A European Central Bank policymaker signals caution on rate hikes, citing limited evidence of persistent inflation pressures.
European Central Bank Governing Council member Gabriel Makhlouf stated he has not observed clear second-round inflation effects, though he acknowledged their potential existence. His remarks suggest upcoming rate hikes may be precautionary rather than a direct response to escalating price pressures.
Markets currently price in further tightening over the next two quarters, with expectations of at least 50 bps in increases. However, Makhlouf noted that even such moves would only push rates into marginally restrictive territory, per the ECB’s own neutral rate definition. This raises questions about the effectiveness of additional hikes in addressing underlying inflation.
Makhlouf also indicated new economic scenarios would be presented in June, hinting at possible adjustments to the ECB’s outlook. His comments reflect ongoing debate within the central bank over the pace and necessity of further tightening.