ECB still has a ‘little way’ to go on rates – Villeroy

PARIS (Reuters) – The European Central Bank still has a “little way” to go with interest rate increases to vanquish core inflation, French ECB policymaker Francois Villeroy de Galhau said in a newspaper interview published on Friday.

Inflation in the euro zone dropped by the most on record in March but growth in core prices accelerated, Eurostat data showed earlier on Friday.

Villeroy said that the ECB, which aims to steer inflation back towards 2% by between end-2024 and end-2025, could only consider the battle over when underlying inflation, which excludes energy and food prices, had also come under control.

“So there is no question of giving up now. Although we have completed most of our rate-hiking journey, we may possibly still have a little way to go,” Villeroy told German daily Frankfurter Allgemeine Zeitung.

Since it is estimated that between one and two years are needed before hikes have an impact on inflation, a “fairly powerful impact” is yet to come from the 3.5 percentage points in increases that the ECB has delivered since July, he said.

Villeroy, who is also governor of the French central bank, added that higher interest rates were beneficial to the vast majority of European banks.

If however, the ECB needed to take action to stabilise the banking sector, it could do so by providing liquidity on a temporary basis, Villeroy said.

(Reporting by Leigh Thomas; Editing by Tomasz Janowski)