European Central Banks Look to Bring Inflation Back to 2% Target

European Central Bank in Frankfurt
European Central Bank in Frankfurt. Photo by bruno neurath-wilson on Unsplash

France and Germany’s central bank officials have announced their aim to bring inflation back to its 2% target. In a joint interview, Bank of France Governor Francois Villeroy de Galhau and Bundesbank President Joachim Nagel said that the European Central Bank’s tight fiscal policies will eventually suppress price growth.

“We’ll bring inflation back to 2% by the end of 2024 or 2025,” Villeroy assured, adding that “This isn’t just a forecast, a projection. It’s a commitment.”

Nagel warned that, in the short term, rate increases will continue to be a necessary mechanism to battle inflation.

As household costs across the European Union continue to rise, several EU-member governments have implemented measures to shield households from surging energy costs. According to central bankers, however, such efforts are not assisting in the pursuit to suppress inflation.

In response to the ongoing inflation hike, the European Central Bank has raised borrowing costs by 200 basis points since July, with officials expecting another rise to be implemented at its next policy meeting in two weeks’ time.