PARIS (Reuters) – Euro zone inflation is expected to continue to fall around the European Central Bank’s (ECB) 2% target by the end of 2025 despite the ongoing conflict between Israel and Palestinian Hamas, said Tuesday François Villeroy de Galhau, member of the board of governors of the Frankfurt institution and governor of the Bank of France.
“We see a clear downward trend (in inflation) (…) we expect inflation to land around 2% by 2025,” he declared on franceinfo.
“I want to say today that we see no reason to change this landing and that we are firmly holding this course in the turbulence. The point undoubtedly to be monitored is the possible extension of the conflict,” he added , referring to Hamas’ weekend incursion into Israeli territory, which sparked a new conflict.
According to François Villeroy de Galhau, the ECB is particularly vigilant about the evolution of oil prices, which have soared since the start of the conflict, but these prices only represent 10% of overall inflation.
Regarding the ongoing monetary tightening of the ECB, the governor of the Bank of France defended the current policy of the Frankfurt institution.
“Inflation is the disease, rising interest rates are the cure. It is not pleasant but effective (…),” he said.
“I actually believe that after having raised rates a lot, now we are at the right level (…),” he added.
According to him, unless there is a turnaround or new data, there is no need to record them further.
(Writing by Claude Chendjou, with Zhifan Liu, editing by Kate Entringer)
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