Inflation fight and ECB rate guidance hold, says Villeroy in Davos

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The European Central Bank has yet to win its fight against high inflation, so its guidance for big interest rate hikes in the coming months remains valid, French central bank governor Francois Villeroy de Galhau said on Wednesday.

The ECB has raised rates by 2.5 percentage points since July and signaled a 50 basis point rise in February and possibly March, all in hopes of bringing inflation back to 2% in 2025 from levels close to 10%. now.

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“We need to stay the course in our battle against inflation; it has not yet been won,” Villeroy told a panel at the World Economic Forum’s annual meeting in Davos.

His remarks come after a Bloomberg News report that some ECB officials are contemplating a lower interest rate hike in March.

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Villeroy appeared to dismiss that, saying ECB President Christine Lagarde’s guidance for a 50bp move in February and possibly subsequent meetings remains valid.

Inflation could peak in the first half of 2023, followed by growth in underlying prices, pulling back to the ECB’s 2% target in late 2024 or early 2025, he said.

Villeroy is also relatively optimistic about growth, arguing that a recession, part of the ECB’s core forecast, could be avoided given recent indicators.

Source: CNN Brasil

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