ECB’s Villeroy: confident we can look through data noise
2024.06.28 07:54
PARIS (Reuters) – The European Central Bank is gaining confidence in expectations inflation will fall back to its 2% target next year and that it can look through bumps in the data flow in the coming months, ECB policymaker Francois Villeroy de Galhau said on Friday.
The ECB began easing interest rates with a first rate cut in five years this month and policymakers have said the pace of further cuts will depend on the incoming flow of inflation data.
Speaking at a conference at the French central bank, which he also heads, Villeroy said that inherently noisy inflation data created a risk of over-reacting to volatile news, especially for the rest of the year.
“As data surprises are now smaller and revisions to the current assessment more minor compared to two years ago, we are gaining more confidence in the forecast and more scope to disregard smaller bumps in the disinflation process,” he added.
The ECB expects inflation to oscillate above its 2% target for the rest of this year but forecasts that it will restart easing next year and reach 2% by the close of 2025.
Villeroy said that the ECB’s 2% target had served it well in recent years and that while there was no reason to change the level looking at whether there is adequate flexibility around it would be considered as part of a strategic review next year.
