French ECB Governing Council member François Villeroy de Galhau suggested that more monetary easing could be warranted later this year if the recent rise in the euro continues to buffer the inflationary impact of higher oil prices.
In an interview with the Financial Times, Villeroy said “inflation expectations remain moderate,” and the currency’s appreciation would help neutralize energy-driven price pressures. “If that was confirmed, it could possibly lead in the next six months to a further accommodation,” he added.
Policymakers will be cautious in reacting to short-term oil moves unless they translate into broader inflation risks. “If we were to see spillovers to underlying inflation and de-anchoring of inflation expectations, then we could possibly adapt monetary policy,” he added.
On the trade front, Villeroy dismissed fears that escalating US-EU tensions would create meaningful inflation in the bloc. He argued that the primary risk is to growth, not prices, given that EU tariffs would apply narrowly to US goods, unlike Washington’s broader measures. The stronger Euro also acts as a buffer, muting any imported inflation effects.
