ECB Governing Council member Villeroy said that the bank faces a risk of slowing inflation greater than the risk of accelerating inflation. If inflation continues to fall below the 2% target, the central bank will take action. The Bank of France governor pointed out that the strengthening of the euro and falling prices of imported goods from China may reduce consumer price increases by 0.2 percentage points in 2027, while warning that further slowdown in wage growth may bring downward pressure. He said the upside risks include supply chain fragmentation and a surge in German government spending. “The downside risk to the inflation outlook is at least as significant as the upward risk, and we will not allow inflation to continue to fall below target,” Villeroy said. Compared to other ECB members, this statement seems more dovish. Villeroy said that it is a “misunderstanding” to think that the ECB will tolerate inflation below but close to 2% for a long time. He stressed that it is wrong to focus on the scale of such deviations; what is important is the persistence of such deviations.

ECB Governing Council member Villeroy said that the bank faces a risk of slowing inflation greater than the risk of accelerating inflation. If inflation continues to fall below the 2% target, the central bank will take action. The Bank of France governor pointed out that the strengthening of the euro and falling prices of imported goods from China may reduce consumer price increases by 0.2 percentage points in 2027, while warning that further slowdown in wage growth may bring downward pressure. He said the upside risks include supply chain fragmentation and a surge in German government spending. “The downside risk to the inflation outlook is at least as significant as the upward risk, and we will not allow inflation to continue to fall below target,” Villeroy said. Compared to other ECB members, this statement seems more dovish. Villeroy said that it is a “misunderstanding” to think that the ECB will tolerate inflation below but close to 2% for a long time. He stressed that it is wrong to focus on the scale of such deviations; what is important is the persistence of such deviations.