ECB to hit inflation target despite data “noise”

PARIS (Reuters) – The European Central Bank will bring inflation back to its 2% target by next year despite expected “noise” in monthly data this year, ECB policymaker Francois Villeroy de Galhau said on Tuesday.

The ECB trimmed its rates by a quarter of percentage point from a record high last week but gave no commitment about further cuts amid high wage growth and yet another increase in inflation projections.

The month to month flow of inflation data would be volatile due to the base effect of comparative numbers for energy, Villeroy told a financial conference in Paris.

“This ‘noise’ is not very meaningful, and hence we are still more ‘outlook driven’ and will look still more closely at the inflation forecast.” Villeroy said.

“We remain confident that barring an external shock, we will bring inflation back to our 2% target by next year, and that we will reach it with a soft rather than a hard landing,” he added.

Villeroy, who is also head of the French central bank, reiterated a call for a gradual approach for future rate moves and said that the ECB had “significant leeway” to cut before monetary policy becomes restrictive.