ECB: Makhlouf: More Reassured On Services Inflation

Central Bank of Ireland Governor Makhlouf struck a cautious tone around the interpretation and use of neutral rates in a blog post, but aligns with the broader ECB view that the direction of travel for policy rates is still downwards. He had previously expressed concerns around the persistance of services inflation (e.g. on December 23), but now notes "reasssuring signals including from wage trackers". There is little in the comments to meaningfully shift market pricing, though. 

• "The neutral rate can be a useful guide for policymakers, but its usefulness is also limited"...."our policy decisions are guided by a comprehensive analysis of a wide range of economic data which is essential to ensure consistency between our view of the implied stance and economic developments. It is also why we need to continue with our data-dependent and meeting-by-meeting approach".
• "We need to retain the flexibility to learn from the signals we observe in the incoming data between meetings and to adjust our thinking on the appropriate decisions, if necessary".
• "We continue to be vigilant about any derailment of the disinflation process from stubbornly high services inflation. On that front, recent months have seen some reassuring signals including from wage trackers. Recent movements in energy prices, especially for gas, will warrant vigilance".
• "On the growth front, risks appear to be firmly to the downside in the euro area, not least as a result of geoeconomic fragmentation affecting patterns of international trade and investment".
• "Some of the key data I will be looking at during this year will include trends in credit demand, firms’ investment decisions and household spending".