François Villeroy de Galhau, the governor of the Bank of France, stated that the European Central Bank (ECB) is determined to bring inflation back to the target of 2%, in the context of rising inflation in the euro area to 3% in April, up from 2.6% in March. This increase was influenced by recent conflicts in the Middle East, which led to rising energy prices, especially after the closure of the Strait of Hormuz.
Villeroy emphasized the importance of limiting the economic impact of these conflicts and the risks of inflation spreading into wages and services. Financial markets expect an interest rate hike in the ECB meeting in June, with increases estimated at least 50 basis points by the end of the year. Yields on European bonds have risen significantly, reflecting investors' expectations for a more aggressive monetary policy.
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