The European Central Bank will intervene as required to bring inflation back to its 2% objective, Bank of France Governor Francois Villeroy de Galhau said in remarks made Tuesday in Singapore.
Speaking on CNBC, Villeroy de Galhau, a member of the ECB’s Governing Council, sought to calm markets that have grown uneasy following a rise in inflation partially tied to geopolitical developments in the Gulf.
"If I speak on behalf of the ECB, this means do what is necessary to bring inflation back to 2% in the medium term. Markets can be assured of that," he said.
Data show eurozone inflation climbed to 3% in April, up from 2.6% in March. The governor linked the increase in part to oil price pressures after what was described as the effective closure of the Strait of Hormuz. Prior to the outbreak of conflict marked by joint U.S. and Israeli strikes on Iran on Feb. 28, inflation had been at 1.9%.
Villeroy de Galhau emphasized the particular exposure of Europe to energy shocks, given the region's status as a major net energy importer. He noted that prices for gasoline, diesel and jet fuel have surged recently, prompting some governments to intervene and raising warnings about potential flight cancellations over the summer.
The governor also said signs of concern over inflation are visible in financial markets, especially in government bond markets. On policy, he reiterated why the ECB left its key interest rate unchanged at 2% last month.
According to Villeroy de Galhau, the decision to hold rates reflected insufficient evidence on potential second-round inflation effects. He defined those second-round effects to include underlying inflation measures that exclude energy and food, shifts in inflation expectations and wage growth.
"The data so far are telling that its mainly a first-round effect, but we should be extremely vigilant about possible second-round effect," he said.
Context and implications
The governor's comments underscore the ECB's readiness to respond if inflation dynamics broaden beyond initial energy-driven moves. At the same time, the central bank is weighing incoming data on wage growth, expectations and core inflation before altering policy.