ECB policymaker Villeroy emphasizes caution on core inflation trends, delaying immediate rate action despite June hike expectations.
European Central Bank Governing Council member François Villeroy de Galhau stated the ECB lacks sufficient data on core inflation to justify an immediate rate hike. He stressed the need for clearer evidence that price pressures extend beyond volatile sectors like energy and food.
Recent data shows core inflation moderating, with wage growth expectations easing to 2.8% from 3.1% in the prior quarter. The ECB’s SAFE survey indicated short-term inflation expectations rose, but long-term outlook remained stable. Markets price a 92% probability of a June rate hike, though Villeroy’s remarks suggest caution.
Villeroy highlighted concerns over second-round effects, where initial price shocks trigger sustained wage-price spirals. Only a significant de-escalation in Middle East tensions or oil prices could alter the ECB’s June decision, according to policymakers.