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Tags: ecb | inflation | rate hikes | francois villeroy

ECB Must Focus on Underlying Inflation: Villeroy

Francois Villeroy
Francois Villeroy de Galhau, a policymaker for the European Central Bank and governor of the Banque de France poses in front of the Banque de France's Citeco (city of economy) prior to its inauguration, in Paris. (Getty Images, 2019 file photo)

Tuesday, 22 March 2022 07:05 AM EDT

The European Central Bank (ECB) needs to look beyond short-term swings in energy prices and focus on underlying inflation trends, ECB policymaker Francois Villeroy de Galhau said Tuesday.

Villeroy, who was speaking at a sustainability conference organized by The Economist magazine, said the ECB needed to normalize monetary policy to keep people's inflation expectations anchored.

"It is indeed time to take our foot off the accelerator, as decided during our last governing council. That said, we should not overreact to short-term volatility in energy prices, and instead focus more on underlying inflation and on the medium term," he said.

Driven by surging energy prices, euro zone inflation hit a record 5.9% last month. Underlying inflation, which strips out volatile items such as energy and food, is also climbing.

The crisis over Russia's invasion of Ukraine has clouded the inflation outlook further by adding to the pressure on energy and commodities prices.

Villeroy, who is also governor of the French central bank, said the energy transition could effect inflation positively and negatively, but its impact on energy costs was most likely to result in some inflationary pressure.

Climate transition policies were not to blame for the current energy price spike, however, he said, and increases in carbon prices on the European Union's Emissions Trading System explained only 7% of the power price increase in France last year.

© 2024 Thomson/Reuters. All rights reserved.


StreetTalk
The European Central Bank (ECB) needs to look beyond short-term swings in energy prices and focus on underlying inflation trends, ECB policymaker Francois Villeroy de Galhau said Tuesday.
ecb, inflation, rate hikes, francois villeroy
226
2022-05-22
Tuesday, 22 March 2022 07:05 AM
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