ECB’s Villeroy: Inflation to Remain Stable Despite Israel Violence

European Central Bank (ECB) policymaker Francois Villeroy de Galhau has expressed confidence that inflation will continue to hover around the target of 2% by 2025, despite the impact of the ongoing violence in Israel. In an interview with franceinfo radio, Villeroy acknowledged concerns about the effect of escalating commodity prices, particularly oil, but emphasized that these prices only have a limited influence on overall inflation. He reassured listeners that inflation is still decreasing steadily.

Oil prices experienced a slight decline on Tuesday following a substantial rally the previous day. Traders remain cautious as they monitor potential disruptions in supply caused by the military clashes between Israel and Hamas. Some analysts draw parallels to the 1973 Yom Kippur War, which triggered a major energy crisis in the West. However, Villeroy dismissed the idea that the current situation would lead to a similar outcome. He emphasized the need for vigilance and acknowledged the added economic uncertainty resulting from the conflict.

Villeroy also commented on the ECB’s current interest rates, which were set last month at a record low of 4% after a series of ten consecutive hikes. He expressed satisfaction with the current level, stating that further increases are not appropriate at this time.

Overall, Villeroy’s remarks highlight the ECB’s commitment to maintaining stability in the face of external challenges. Despite the violence in Israel and its potential impact on commodity prices, Villeroy remains optimistic that inflation will remain on target. This perspective offers reassurance to market participants and indicates the ECB’s readiness to take necessary measures to manage economic uncertainty.