ECB’s Makhlouf: Can Wait and See Whether We Need to Adjust Our Policy Stance

29 July 2025

By David Barwick – FRANKFURT (Econostream) – The European Central Bank can now wait to see whether incoming information dictates a further adjustment of its interest rates, ECB Governing Council member Gabriel Makhlouf said Tuesday.

In a blog post on the website of the Central Bank of Ireland, which he heads, Makhlouf characterised last Thursday’s decision by the ECB to leave interest rates unchanged as ‘relatively straightforward.’

‘For my part, I think we have reached a point in our easing cycle where we can wait and see whether the data and evidence indicates the need for a change in our monetary policy stance’, he continued. ‘We are not committing to a particular rate path, and will continue to take account of new information when it arrives’.

Policymakers must realise that they cannot know where a ‘rapidly evolving’ environment would lead, he said.

Without more detailed information, the new US-EU trade agreement could not be commented on knowledgeably, he said. In any case, relative to the situation of six months ago, 15% tariffs imposed by the US on Europe ‘will dampen economic growth, although it will be partially offset by reducing uncertainty and the likelihood of more damaging trade war that has dominated the economic environment since the start of the year’, he said.

US fiscal policy appeared likely to lead to significantly increased issuance of US Treasuries, he said. This ‘could affect pricing for a wide range of assets across the globe’ and was ‘something to keep a close eye on’, he said.

Since the ECB’s June macroeconomic projections, NATO members had committed to substantial new military expenditures, but the effect on European growth would depend on details of the spending and its financing, he said.

To the extent this spending went to research and development, it could ultimately lead to higher potential growth, he said. Other military spending ‘may have favourable demand effects only in the short term, with muted long-run effects’, and from a fiscal perspective could ‘have detrimental effects overall, possibly resulting also in higher inflation’, he said.

The June projections had incorporated further appreciation of the euro and lower energy prices, he said. These elements were subject to fluctuations and could easily need revisiting in later projection exercises, he said.

‘I will keep a close eye on developments in these markets to ascertain whether the likelihood of the central forecast materialising has changed’, he said.