Makhlouf backs 25bp rate increase to 2.5 percent
Central Bank of Ireland Governor Gabriel Makhlouf supported the European Central Bank’s decision to raise the deposit facility rate by 25 basis points to 2.5 percent. Makhlouf cited persistent energy price pressures and upward revisions to medium-term euro area inflation projections.
Energy pressures push up inflation path
Euro area headline inflation reached 3.3 percent in August from 2.9 percent in July, while core inflation eased slightly to 2.4 percent.
Central Bank of Ireland Governor Gabriel Makhlouf noted that energy price increases have proven stickier than anticipated.
Euro area wage growth stood at 3.3 percent in the second quarter of 2026, with staff projections forecasting wage increases to average 3.3 percent in both 2026 and 2027.
Updated macroeconomic projections revised the inflation path upward, delaying the expected return to the 2 percent target into the medium term.
Euro area GDP growth projections were adjusted upward to 0.9 percent for 2026 and 1.4 percent for 2027.
Meeting by meeting amid geopolitical friction
Makhlouf affirmed that the ECB Governing Council maintains a meeting-by-meeting stance without pre-committing to a rate trajectory.
Tightening financing conditions and cooling labor markets mean additional tightening carries growth risks amid Middle East tensions.
For Ireland, annual inflation reached 3.4 percent in August from 3.1 percent in July, while modified gross national income expanded 4.7 percent in 2025.
Recent central bank analysis also identified an extra €6.1 billion in Irish household securities held in non-domestic euro area custodian accounts.
Clear rationale, blunt instrument
Makhlouf provides welcome transparency by linking granular data directly to his rate vote.
Yet using rate increases against geopolitical energy shocks highlights the limits of central bank policy.
The text clarifies his reasoning while leaving the precise trigger for a policy pause undefined.
Source: Why we raised rates again and what lies ahead
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