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ECB's Makhlouf sees continued fall in prices during pandemic

FILE PHOTO: The European Central Bank logo. Frankfurt, Germany, January 23, 2020. REUTERS/Ralph Orlowski

DUBLIN (Reuters) - European Central Bank governing council member Gabriel Makhlouf said he expects demand factors will continue to dominate how the COVID-19 pandemic impacts inflation and will lead to a fall in prices.

“Predicting how demand and supply shocks will interact over the medium to long term is not straightforward... As both demand and supply side factors will continue to impact on inflation, I believe that demand factors will dominate and lead to a fall in prices,” Makhlouf told an online conference.

“Fear of infection, weak labour markets, heightened uncertainty and higher precautionary savings will lead to lower demand for goods and services which implies that the real natural rate of interest is likely to remain at low levels,” said Makhlouf, who is the head of Ireland’s Central Bank.

Reporting by Padraic Halpin, editing by Louise Heavens