ECB’s Villeroy: Euro Strength Could Increase Risk of Undershooting

4 July 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Friday that there was a risk that inflation would undershoot the ECB's 2% target if the strength of the euro were to persist.

In an interview with Bloomberg TV, Villeroy, who heads the Banque de France, said that a prolonged 10% appreciation of the euro would cause inflation to decline by 0.2% annually in the next three years.

‘It could increase the risk of undershooting our target’, he said, and ‘this is a risk we must take into account.’

The strength of the euro versus the US dollar could have ‘a significant effect on inflation’, he said.

The ECB was now ‘in a good position’, according to Villeroy, who said that this was not ‘a question limited to July or September.’

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