ECB’s Makhlouf: Services Inflation and Wage Growth Imply Uncertainty Around Baseline Forecast

13 September 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Friday said that the ECB’s central inflation scenario was subject to uncertainty.

In a blog post on the website of the Central Bank of Ireland, which he heads, Makhlouf said that while the ECB was still headed towards 2% inflation at the end of next year, there was ‘some uncertainty around this baseline forecast’ due in particular to ‘more persistent services inflation and stronger than expected wage growth’, which could affect the outcome.

‘Both are expected to remain high for the rest of this year and, in the case of wages, exceptionally volatile’, he said.

Policymakers remained ‘determined to ensure that inflation in the euro area returns to its 2% medium-term target in a timely manner’, he said.

Amid high uncertainty with regard to services inflation, wage growth, the economy and possible geopolitical shocks, monetary policy would be data-dependent, he said.

‘We are not pre-committing to a particular rate path’, he said.

Over the next three months, inflation in the region would strengthen again, but weaken thereafter, he said.

There were ‘tentative signs of an easing in measures of momentum’ of services inflation, he said. For it to slow next year, wage growth would have to ease, he said.