ECB’s Makhlouf: ‘Incredibly Uncertain’ Whether and When We Need to Take Action

8 April 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Friday said that it was extremely unclear what and when the ECB needed to take monetary policy steps.

During a panel discussion at a conference in Greece, Makhlouf, who heads the Central Bank of Ireland, said, ‘We are focused on price stability. There is absolutely no doubt at all that the Governing Council wants to and is going to deliver its mandate, which is to get inflation to 2% over the medium term.’

The normal response to the supply shocks being seen now would not be monetary policy, and policymakers need to determine whether the shocks are having effects that nonetheless require a response’, he said.

‘But the picture is not clear-cut, notwithstanding that inflation is at a level that’s very concerning’, he said. ‘But whether or not we need to take action and when we might need to take action, I think that’s incredibly uncertain.’

Makhlouf called it ‘very important’ that the US economy was not in the same position as that of the euro area. Indeed, this was the case going into the pandemic, which then triggered a ‘much stronger’ fiscal reaction by the Americans compared to the Europeans, he said. The energy price shock is different in Europe as well, he added.

‘So, the situation in the US is different, and there the economy is running hot, and basically that’s why the Fed is taking the action it is’, he said. ‘And it is different here. That’s not to say we haven’t got similar circumstances.’

Although there was ‘always the danger that we talk ourselves into a recession’, he said, in the euro area ‘the evidence at the moment anyway is that there’s going to be less growth and there’s going to be more inflation, but there is going to be growth, and that’s more likely than not to continue.’