ECB’s Villeroy: US Tariffs ‘Not Expected to Alter Significantly the Inflation Outlook’

21 November 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Thursday that if US President-elect Donald Trump were to raise tariffs against Europe, the region's inflation wouldn’t suffer a big hit.

In a speech in Tokyo, Villeroy, who heads the Banque de France, said that risks to the inflation and growth outlook were ‘shifting to the downside, and possible U.S. tariffs are not expected to alter significantly the inflation outlook in Europe.’

The ECB’s 25bp October cut would not be the last rate cut of the easing cycle, he said.

‘Looking forward, the path is clear in my view – we should continue to reduce the degree of monetary policy restriction,’ he said.

For Villeroy, the pace at which the ECB should cut rates must rely on ‘agile pragmatism’ and the central bank should ‘maintain full optionality’ for meetings in the coming months.

The latest uptick in negotiated wages in the Eurozone for Q3 is ‘a somewhat backward-looking indicator, mainly driven by the lagged effects of past negotiations in Germany’, according to Villeroy.

Moreover, this figure was already taken into consideration in the September forecasts, he said.