Francois Villeroy de Galhau, chief of the French central bank, said the European Central Bank would reject excessive price hikes even if its policy changes since euro zone inflation may exceed 2%.
Due to rising prices and underlying pricing pressures, the ECB has raised 350 basis points since July.
Villeroy warned of “core” inflation in New York Tuesday—potential inflation.
Since the ECB’s monetary strategy was most successful at suppressing core inflation, Villeroy projected prices to climb to 2% by 2024 or 2025.
Markets expect an ECB rate rise of 25 basis points on May 4.
Villeroy said future ECB decisions would be based on inflation expectations, underlying inflation, and policy transmission.
Two 25-basis point rises are fully factored in, while markets are split on a third. As a result, by the third quarter, the ECB’s 3% deposit rate is forecast to peak at 3.65%.
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