In an interview with La Repubblica, ECB Governing Council member François Villeroy de Galhau noted a shift in the “balance of risks” for Eurozone economy. He said that for the past two years, the primary concern was overshooting the ECB’s 2% inflation target. However, Villeroy emphasized that the focus is now also on the risk of “undershooting” the target due to “weak growth” and maintaining “restrictive monetary policy for too long.”
Villeroy emphasized the importance of maintaining “full optionality” for this month’s monetary policy meeting, stressing that a pragmatic approach—evaluating the situation “meeting by meeting”—is essential. This adds to the growing chorus within the ECB suggesting that October meeting could bring about further easing if conditions warrant it.
Looking ahead, Villeroy suggested that if inflation sustainably returns to 2% next year, and growth in Europe remains sluggish, “there won’t be any reason for our monetary policy to remain restrictive”.
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