Gabriel Makhlouf, a member of the ECB's governing council and governor of the Bank of Ireland, said in an interview that policy makers must be prepared to deal with rising inflation caused by persistent supply bottlenecks.
"We have to be highly vigilant about the risks," Makhlouf said. He said shortages in manufacturing were pushing up prices and that if wages eventually rose, it could "potentially" lead to faster and longer-lasting inflation.
"this is a risk that the ECB needs to be very cautious, very clear and prepared to deal with," Makhlouf said. But,At the moment, I don't think we should consider raising interest rates or responding to temporary inflation shocks. "
Although inflation has soared above the ECB's target, ECB President Christine Lagarde said on Tuesday that it was blamed on rising energy prices since 2020 and friction caused by supply chain bottlenecks. "the key challenge is to ensure that we do not overreact to temporary supply shocks that have nothing to do with the medium term," she said. "
In addition, ECB officials have said they will not decide on the future course of monetary policy until December. The ECB's 1.85 trillion euros ($2.2 trillion) emergency anti-epidemic bond purchase program is expected to expire at the end of March or until the end of the crisis phase of the epidemic, and the central bank's focus has shifted to how to adjust its old bond purchase program. to safeguard economic recovery.
"these emergency bond purchase programs were set up for emergencies at the beginning of the epidemic," Makhlouf said. When we see the emergency disappear, this particular plan will have a logical outcome. On the other hand, the ECB still needs a long time to discuss, and there is still a lot of uncertainty about what is happening in the economies. "