(Bloomberg) -- The European Central Bank is “very confident” it will sustainably reach its 2% inflation target and should even get there earlier than expected in its September forecasts, Francois Villeroy de Galhau said.
The Bank of France governor said policymakers aren’t “behind the curve” and, guided by data, will ensure inflation doesn’t fall too far in the future. Price gains were at 2% in October but are expected to accelerate again before settling at the ECB’s goal.
“We will determine the pace of our further monetary easing in a pragmatic way, and following a data-driven and meeting-by-meeting approach,” he told the Frankfurt European Banking Congress. “We are confident that victory against inflation is in sight, but we will pay close attention to the balance of risks and to its symmetry, including the possible risk of undershooting our inflation target.”
He spoke after investors ramped up bets on heftier rate cuts following figures showing that business activity in the euro area unexpectedly shrank in November. The common currency also fell to its lowest level in two years.
Villeroy said Europe has a longer-term growth problem that risks being exacerbated if Donald Trump delivers on pledges for more trade tariffs. In the shorter term, though, he said the economy “is achieving a soft landing” after the inflation spike.
Speaking at the same event, Bundesbank President Joachim Nagel said the ECB’s price target will be met by mid-2025 at the latest, with Friday’s purchasing managers’ index data confirming that Germany is facing a bout of stagnation.
“It’s not a big secret that over the next maybe 12 months we will see maybe further rate cuts,” he said. “But I do not speculate when a rate cut will come and how large it might be. The most important thing is that we’re on the right track.”
--With assistance from William Horobin.
(Updates with Nagel comments in last two paragraphs.)
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