ECB may raise rates again due to secondary inflation effects — Asharq Al-Awsat
The European Central Bank may raise interest rates again if high energy prices begin to spread to prices in other sectors. Gabriel Makhlouf, an ECB official and governor of the Central Bank of Ireland, said this on September 23, 2026, Asharq Al-Awsat reports.
No secondary effects observed so far
According to Makhlouf, inflation remains above the ECB's target level, but the regulator currently does not see secondary inflation effects. This refers to a situation in which higher energy costs spread to prices in other areas of the economy.
He noted that if high energy prices persist for a long time and affect other price categories, the ECB will have to take action again to achieve its inflation target.
Earlier this month, after the ECB's second rate hike this year, Makhlouf warned that a more significant tightening of monetary policy could harm economic growth.
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Productivity gap with the United States
The ECB also stated that the European Union could reduce its labor productivity gap with the United States by about one-third if it had the same ratio of large to small companies. According to academic research, workers in the EU produce 20% less output per hour than their American counterparts; in 1995, this figure was nearly the same.
ECB experts found that large companies are more productive than small ones: enterprises with at least 250 employees generate an average of €86,800 in value added per employee per year. At firms with fewer than ten employees, this figure is less than half that amount.
The central bank also linked Europe's weaker productivity to a lower level of innovation, fragmented regulation, and less developed capital markets. The ECB supported the proposed EU Inc initiative, which provides for a single corporate legal regime for companies operating in European Union countries.
