Villeroys: ECB won't let inflation set in

The European Central Bank (ECB) remains committed to preventing persistent inflation, with policymaker François Villeroy de Galhau emphasizing the need for flexibility amid balanced upside and downside risks. Speaking at a conference in Paris, Villeroy noted that while inflation in the eurozone has stabilized near the ECB's 2% target, uncertainties such as global supply chain shifts and wage dynamics necessitate keeping policy options open. This stance aligns with the ECB's recent decision to hold key interest rates steady at 2% following eight consecutive rate cuts, as inflation remains "well under control" at 2% in the euro area and 0.9% in France.

Villeroy highlighted that recent U.S. tariff measures, while detrimental to growth, are unlikely to significantly elevate European inflation, as costs have largely been absorbed by U.S. consumers. Additionally, a stronger euro has acted as a disinflationary force, offsetting potential price pressures. However, risks to price stability remain evenly balanced, with factors such as slower wage growth and cheaper Chinese imports counteracting inflationary threats.

The ECB's data-dependent approach underscores its readiness to adjust policy as needed. Villeroy reiterated that "the only fixed figure is our 2% inflation target," with no predetermined terminal rate. This flexibility is critical amid heightened global uncertainty, including geopolitical tensions and evolving economic conditions. By prioritizing agility, the ECB aims to ensure inflation remains anchored to its medium-term objective while supporting a resilient recovery.