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ECB: PMIs Appear To Have Softened Makhlouf's Outlook

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The weakness in Friday’s PMIs appear to have softened Central Bank of Ireland’s Makhlouf’s outlook today. He still advocates for some caution but is open-minded on the slope of the downward trajectory in rates vs pushing a “prudent and cautious approach” with no rush to achieve the ECB's target in Nov 18 remarks. 

  • “Measures of economic activity have been volatile. Third quarter GDP was towards the top-end of the range in our September projections. Against this, the November PMI was weak, along with data on new orders. Weaker growth is a downside risk to inflation, and we will know more after the updated Eurosystem staff projections in December."
  • Rates on a downward trajectory: “It is clear that policy remains restrictive and, shocks aside, rates are on a downward trajectory. Given the volatility and the data and the substantial uncertainty regarding economic policy in trade partners, I remain open-minded on slope of this downward trajectory. This is in line with our data-dependent approach to setting policy.”
  • Increasingly confident of reaching 2% target but still some caution: “[O]n the always topical issue of monetary policy, recent data make me increasingly confident of reaching our 2% inflation target during 2025, but the stickiness of services inflation and elevated wage growth leave some room for caution.”
  • “Services inflation has averaged around 4% this year in the euro area.  With goods inflation around its long-term average of 0.5-1%, I want to see services inflation closer to 3% in order to be more in-line with our target. In support of this, there are some signs of labour market loosening, which will help to ease upward wage pressures. Forward-looking surveys and wage trackers also point to a slowing of wage growth next year.”
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The weakness in Friday’s PMIs appear to have softened Central Bank of Ireland’s Makhlouf’s outlook today. He still advocates for some caution but is open-minded on the slope of the downward trajectory in rates vs pushing a “prudent and cautious approach” with no rush to achieve the ECB's target in Nov 18 remarks. 

  • “Measures of economic activity have been volatile. Third quarter GDP was towards the top-end of the range in our September projections. Against this, the November PMI was weak, along with data on new orders. Weaker growth is a downside risk to inflation, and we will know more after the updated Eurosystem staff projections in December."
  • Rates on a downward trajectory: “It is clear that policy remains restrictive and, shocks aside, rates are on a downward trajectory. Given the volatility and the data and the substantial uncertainty regarding economic policy in trade partners, I remain open-minded on slope of this downward trajectory. This is in line with our data-dependent approach to setting policy.”
  • Increasingly confident of reaching 2% target but still some caution: “[O]n the always topical issue of monetary policy, recent data make me increasingly confident of reaching our 2% inflation target during 2025, but the stickiness of services inflation and elevated wage growth leave some room for caution.”
  • “Services inflation has averaged around 4% this year in the euro area.  With goods inflation around its long-term average of 0.5-1%, I want to see services inflation closer to 3% in order to be more in-line with our target. In support of this, there are some signs of labour market loosening, which will help to ease upward wage pressures. Forward-looking surveys and wage trackers also point to a slowing of wage growth next year.”