DUBLIN, Sept 11 (Reuters) – A drawn-out conflict in the Middle East risks keeping inflation elevated for a long period but the European Central Bank could also damage economic growth if it raises interest rates “a great deal more”, ECB policymaker Gabriel Makhlouf said on Friday.
The ECB raised borrowing costs on Thursday for the second time this year and sources told Reuters policymakers expect further policy tightening in the months ahead, with a move possible as early as October.
“There remains significant uncertainty to the outlook,” Makhlouf wrote on a blog on the Irish central bank’s website.
“The near-term driver of elevated inflation remains energy. A drawn-out conflict in the Middle East risks keeping inflation elevated for a long period. But the other side of uncertainty is that raising rates a great deal more from here could carry real costs in terms of growth.”
(Reporting by Padraic Halpin, editing by Sam Tabahriti)
Comments