ECB’s Makhlouf: ‘Have Now Reached the Point When We Need to Act’
12 May 2022
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Thursday said that it was time for monetary policy to act, lest high inflation cause expectations to disanchor.
In a speech before an Irish business association, Makhlouf, who heads the Central Bank of Ireland, said that ‘the disinflationary dynamics that the euro area has experienced over the last decade are very unlikely to return and we have now reached the point when we need to act.’
High inflation threatens expectations that the ECB will deliver on its price stability mandate, he said.
‘The balance of advantage has tilted decisively towards the need for further action, albeit not necessarily at a similar pace to that of other central banks that have also changed their stance, such as the Federal Reserve’, he said.
The ECB should end net asset purchases ‘either next month or in July’, he said. As for rate hikes, he said, it ‘is clear is that the era of negative rates is reaching its conclusion’, but less clear ‘when exactly rates should start to rise and when they should stop rising.’
‘I think it is realistic to expect that the first move in the ECB’s interest rates will happen soon after net asset purchases end and that rates are likely to be in positive territory by early next year’, based on incoming data, he said.