ECB’s Villeroy: ‘We Should Reach Our 2% Target Earlier Than Expected in 2025’

18 October 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Friday that despite near-term rises in monthly inflation data, the ECB should reach its inflation target before Q4 2025.

In a statement published on the website of the Banque de France, which he heads, Villeroy said that ‘after perhaps some temporary monthly increases, we should reach our 2% target earlier than expected in 2025’.

The risk of undershooting the ECB's inflation target was now as important as the risk of overshooting, he said.

Economic activity in the Eurozone was not yet showing signs of recovery, he said.

‘[T]he European economy is experiencing a soft landing, with no recession but no clear "take-off" still in sight at this stage’, he said.

The impact on inflation of the uninterrupted decline seen in private investment and consumption, alongside the latest upsurge in household saving rates, backed the latest rate cut by the ECB, according to Villeroy.

‘This is not the first rate cut, and it will not be the last’, he said, ‘[…] In other words: the direction is clear to me – we should continue to reduce the restrictiveness of our monetary policy appropriately.’

The speed at which the ECB moves must depend on ‘agile pragmatism’, he said.

‘[I]n a very uncertain international environment, we maintain total optionality for our next meetings’, he added.