BRUSSELS/FRANKFURT/PARIS (dpa-AFX) - The European Central Bank 'will do what is necessary' to bring inflation back to the 2 percent target, ECB policymaker and Bank of France Governor Villeroy de Galhau said in an interview to the broadcaster CNBC on Tuesday.
Eurozone has been witnessing steadily rising inflation since the war in Iran began. Energy costs have surged owing to the rising crude oil price, triggered by the supply disruptions caused by the closure of the Strait of Hormuz. Headline inflation in the euro area shot up to 3 percent in April from 2.6 percent in the previous month.
As the Middle East conflict drags on, inflationary pressures continue to build and are slowly feeding into the financial markets by way of rising bond yields, and also into the real economy.
'The data so far are telling that it's mainly a first-round effect, but we should be extremely vigilant about possible second-round effect,' Villeroy de Galhau told CNBC. 'So, again, have no doubt we will act as much as necessary.'
His comments were similar to those given in an interview to the Le Figaro newspaper that was published on Monday.
In April, the ECB chose to leave the key interest rate unchanged at 2 percent as policymakers waited to see more evidence of the second-round inflation effects, Villeroy de Galhau said.
While the impact is widely seen as temporary, ECB policymakers including President Christine Lagarde are largely hinting at an interest rate hike in June, which economists and markets predict to be a one-and-done deal.
Villeroy de Galhau is set to step down from the helm of the Bank of France in June after an 11-year term. He will be succeeded by Emmanuel Moulin.
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