ECB Navigates with Caution Amid Volatile Inflation

The latest statement from ECB policymaker Makhlouf suggests that the upcoming monetary policy decision will not come as a surprise. Although market expectations are already high for an interest rate hike next week, Makhlouf stressed that current policy is not restrictive and positions the institution to respond to significantly higher inflation risks. According to him, the ECB should prepare for further rate hikes if inflationary risks increase substantially. However, Makhlouf also indicated there is no clear evidence yet of a second round of rate increases being necessary after the next move. The economy continues to be supported by stable inflation expectations and controlled real wages. Nonetheless, the situation in the Gulf region remains uncertain and could influence future ECB monetary policy decisions.