ECB’s Makhlouf: Should See Firm Economic Rebound This Year

23 April 2021

By David Barwick – FRANKFURT (Econostream) – A solid economic recovery in Europe should become more apparent during the current year, European Central Bank Governing Council member Gabriel Makhlouf said on Friday.

In a blog post on the website of the Central Bank of Ireland, which he heads, Makhlouf said that underlying inflation continued to be subdued.

‘Overall, progress with vaccinations and the gradual relaxation of restrictions to economic activity underpin the expectation of a firm rebound in economic activity in the course of 2021’, he wrote.

Makhlouf’s Governing Council colleague, Banco de España Governor Pablo Hernández de Cos, today also spoke of vaccination and an easing of public health measures as reasons to expect ‘a firm rebound in economic activity’ this year.

Makhlouf noted increased optimism that ‘holds for the euro area as well, as the IMF also confirmed in its latest forecasts.’ Despite probably negative quarterly growth in 1Q, ‘forward-looking indicators are telling a more positive story’, he said, citing PMIs.

‘As for prices, inflation has increased in recent months, although there are a number of temporary and idiosyncratic factors behind that’, he said. ‘The reality is that underlying price pressures remain subdued.’

‘Policymakers will continue to provide support to the economy through the challenges brought on by COVID-19’, Makhlouf wrote. ‘I am hopeful that we are approaching better days and that an economic recovery can take hold later this year.’

However, the pandemic’s full impact was yet to come, ‘and we need to prepare for it’, he continued. ‘There will be some difficult choices to make.’

Policymakers much ‘ensure that the recovery takes hold and gathers momentum before we then turn to the challenge of building back the resilience that has served us so well through these difficult times’, he said.

The Governing Council’s decision yesterday to stay the course means ongoing favourable financing conditions, ‘which remains essential to reduce uncertainty and bolster confidence and underpin economic activity as well as safeguard medium-term price stability’, he said.