Central Bank governor Gabriel Makhlouf wans rates could go up next month

Central Bank governor Gabriel Makhlouf didn’t rule out an increase in interest rates next month should data signal the need for such a step. Picture: Paulo Nunes dos Santos/Bloomberg

Central Bank governor Gabriel Makhlouf didn’t rule out an increase in interest rates next month should data signal the need for such a step, though said it’s impossible to commit with uncertainty so high.

The ECB governing council member told Bloomberg Television that he “can well understand” markets bets for two hikes this year — which is part of the ECB’s baseline. He stressed, though, that he and his colleagues will take a calm and careful approach to formulating any response.

“If the facts point to us having to take action, we will absolutely take action,” he said Friday. “But in the end it depends on the evidence and quite clearly, we are six weeks away from having to make another decision. Six weeks is — in the life of this particular shock — a very long time. Let’s see where we are in April.” 

Mr Makhlouf joins other ECB officials in warning that the ramp-up in energy prices stemming from the Iran war could require higher borrowing costs. While policymakers left borrowing costs unchanged on Thursday, new projections indicated inflation will jump above the 2% target this year while the economy will slow.

Action may not be far away. Bundesbank president Joachim Nagel said Friday that the ECB will need to consider hiking rates as soon as next month if price pressures build further. Officials consider an April move as a possibility, people familiar with the matter have said.

For Mr Makhlouf, there’s currently no bias toward tightening but the ECB is paying “particularly close attention” to energy prices and will react if required.

“In the end, the most important thing is our determination to achieve the 2% price stability target,” he said. “The next meeting is a live meeting, definitely."

Bloomberg