ECB’s Makhlouf: Beyond the Short Run, Inflation Risks Are ‘Less Clear’

30 April 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Wednesday said that inflation faced downside risks in the short run, but more ambiguous risks further out.

In a speech at the Dublin Chamber, Makhlouf, who heads the Central Bank of Ireland, said, ‘With the exceptional uncertainty around where things might finally land, it is difficult to say what the impact of US tariffs, and any retaliation by the EU and others, is likely to have on inflation in the euro area.’

Factors such as a possible redirection of Chinese goods and the exchange rate would contribute to determining this impact, he said.

The strengthening of the euro was deflationary and growth prospects had worsened as high uncertainty made consumers and firms more hesitant about spending and investing, he said. Especially business investment would probably be on hold until there was greater clarity , he said.

‘Furthermore, the market response to recent events has led to a tightening of financing conditions’, he said. ‘All of these factors are a negative for the economic outlook for the euro area, and a downside risk for inflation in the near term.’

‘However, for the more policy-relevant medium term outlook, the risks are less clear’, he continued. ‘All of this uncertainty reinforces the value of following a meeting-by-meeting approach to determining the appropriate monetary policy stance for the euro area.’