ECB’s Villeroy Says Stronger Euro Heightens Risk of Inflation Undershoot

European Central Bank Governing Council member François Villeroy de Galhau said the recent appreciation of the euro is exerting a "clear disinflationary effect" on the currency bloc, helping to slow price growth across the euro area. Villeroy warned that the stronger currency could raise the likelihood of inflation falling below the ECB’s 2% medium-term target, noting that the risk of an inflation undershoot is "increasing." Despite the shift in price pressures, he emphasized that the central bank remains "in a good position" with its current policy settings to manage both interest rates and inflation, signaling no immediate need for a policy change.