DUBLIN, Feb 6 - Gabriel Makhlouf, a policymaker at the European Central Bank, highlighted two risks to the euro zone outlook: a potential loss of momentum in economic growth and the prospect that inflation could undershoot the ECB’s 2% target in a more entrenched fashion.
Writing on his blog on the Irish central bank’s website, Makhlouf said he was monitoring developments closely even as he noted that longer-run expectations for inflation remained aligned with the 2% objective. In his post he stated: "On the undershoot, long-run inflation expectations remain anchored at our 2% target. This does not currently suggest a persistent undershoot dynamic, but we continue to closely monitor developments here."
Makhlouf singled out wage growth as a particular item for scrutiny. He cited surveys and forecasts that point to wage growth settling at around 3% in 2026 to 2028, and said that such a trajectory would reduce the risk that inflation remains persistently below target.
The policymaker framed these observations as central to the ECB’s assessment of the outlook, signaling attention both to the speed of economic activity and to underlying price pressures. The commentary did not advance policy decisions or provide new numerical updates beyond the references to inflation expectations and the forecasted path for wages.
For observers, Makhlouf’s note places emphasis on two channels that can shape the inflation outlook: aggregate demand as reflected in growth momentum, and cost or income-side dynamics as reflected in wage developments. While long-run inflation expectations are described as anchored, the possibility of weaker growth or a more entrenched undershoot remains a concern that the ECB is tracking.
Contextual points
- Makhlouf identified a slowing of euro zone economic growth and a potential persistent undershoot of the 2% inflation target as risks to the outlook.
- He emphasized that long-run inflation expectations stay anchored at 2%, which he said does not currently indicate a persistent undershoot.
- Wage growth was singled out for close attention; surveys and forecasts pointing to wage growth around 3% in 2026-2028 would mitigate the risk of a persistent undershoot, according to Makhlouf.