ECB Governing Council Makhlouf: Will continue to cut interest rates but is open to the exact speed

Zhitong Finance learned that the ECB Governing Council and Bank of Ireland Governor Gabriel Makhlouf said that the ECB will cut interest rates, but the speed and pace will depend on the data. Makhlouf's remarks are consistent with previous remarks and reflect the ECB's reliance on data. Officials have cut interest rates three times since June and are expected to cut interest rates again next month.

Makhlouf said: “It is clear that the policy is still restrictive. Leaving aside shocks, interest rates are on a downward trajectory. I am open to this downward slope, given the volatility, data, and huge uncertainty about the economic policies of trading partners.”

Speaking at the London Association of Professional Economists on Monday, Makhlouf also said: “Recent data makes me more and more confident that we can achieve the 2% inflation target by 2025, but the stickiness of inflation in the service sector and rising wage growth give us some room for caution. The average inflation rate in the Eurozone services sector this year is around 4%. Commodity inflation is near the long-term average of 0.5-1%, and I would like to see service inflation close to 3% to better meet our goals.” In support of this, there are signs of loosening in the labor market, which will help ease upward pressure on wages. Forward-looking research and wage tracking agencies have also indicated that wage growth will slow down next year.”

Makhlouf added: “The indicators for measuring economic activity have always been unstable. In our September forecast, third-quarter GDP is close to the high end of the range. In this context, the November PMI and new order data were weak. The economic slowdown poses a downside risk to inflation, and we will learn more after Eurosystem staff's latest forecasts for December are released.”