The ECB must focus on the underlying inflation, says Villeroy

Paris — The European Central Bank (ECB) needs to go beyond short-term fluctuations in energy prices and focus on the underlying inflationary trends, ECB policymaker François Bill Roydegarhow said Tuesday. rice field.

Villeroy, who spoke at a sustainability conference hosted by The Economist, said the ECB needs to normalize monetary policy to fix people’s inflation expectations.

“It’s certainly time to take our feet off the accelerator, as decided by our last board. However, we shouldn’t overreact to short-term fluctuations in energy prices, instead. We should focus more on the underlying inflation and the medium term. “

Inflation in the euro area reached a record 5.9% last month, driven by soaring energy prices. Fundamental inflation, which removes unstable items such as energy and food, is also rising.

The crisis over Russia’s invasion of Ukraine has further clouded inflation outlook by increasing pressure on energy and commodity prices.

Billroy, who is also the governor of the French Central Bank, said energy conversions could have positive and negative impacts on inflation, but the impact on energy costs was most likely to bring inflationary pressure.

However, climate change policy is not due to the current rise in energy prices, he said, and the rise in carbon prices in the European Union’s emissions trading system explained only 7 percent of the rise in France’s electricity prices last year. rice field.

Lee Thomas