MNI: ECB's Villeroy Downplays "Last Mile" On Inflation

The European Central Bank has probably reached a plateau on rates where it can "experience the altitude and appreciate the view" as it weighs incoming data for several months before any change to rates, Bank of France Governor Francois Villeroy said in a speech on Monday, adding that he did not obsess about the "alleged challenge of the last mile" on inflation.

Rates will only be eased once headline and underlying inflation, together with wages data, combine with a 2% forecast sufficiently ahead of the end of the projection horizon, including a decline towards target in household and business price expectations, he said according to prepared remarks of a speech in London.

The ECB could possibly decide to end reinvestments of maturing securities acquired under its Pandemic Emergency Purchase Programme before the end of 2024, he said, stressing that this would not be dependent on sequencing with rate cuts.

“As long as our rates are in restrictive territory – which will clearly remain the case - withdrawing past balance sheet expansion can be consistent with our overall monetary stance,” Villeroy said.

Stressing the ECB's determination to return inflation to target, Villeroy noted that, while there could be "some ups and downs" in coming months, "the disinflationary trend is solid and somewhat quicker than expected on both sides of the Atlantic" despite Middle East conflict. In a reference to comments by more hawkish officials including Executive Board member Isabel Schnabel, he said he was not so concerned by the danger that the last leg of the struggle against inflation would be the most difficult.

The BdF chief rejected the idea that the ECB could raise its 2% inflation target, saying this could risk "blurring expectations.”