ECB’s Villeroy says inflation is too strong and too broad

Bloomberg

The European Central Bank (ECB) must pare back stimulus as inflation is too strong and too broad, Governing Council member Francois Villeroy de Galhau said.
In a speech at an economics conference in Paris, the Bank of France chief said that even a measure of core inflation — which strips out the impact of surging prices of food and energy — is above the ECB’s 2% target after reaching 3.8% in May. He said the central bank’s meeting next week will be “decisive” in setting out a response.
“Inflation is not only too high, but also too broad,” Villeroy said. “This requires a normalisation of monetary policy — I say normalisation and not tightening.”
The French central banker did not comment further as ECB policy makers are currently in a quiet period ahead of the two-day meeting that concludes with June 9.
Previous remarks from ECB President Christine Lagarde have indicated an imminent end to bond purchases followed by quarter-point rate hikes in July and September.
Villeroy has echoed her comments, saying the process should be “gradual but resolute” — but more hawkish members of governing council have called for a sharper
increase in borrowing costs.
Villeroy said that less accommodative policy coupled with growing constraints on government budgets means Europe will have to combine means “with a little creativity” in the longer term to achieve objectives in digitalisation and the green transition.
“Fiscal policy will itself be further constrained by the high level of post-Covid public debt, and by the increase in interest rates,” Villeroy said. “Furthermore, in the two next years, the context will be one of slower growth, or even,
according to some fears, of economic stagnation.”