'ECB Has Won Battle Against Inflation in the Eurozone, Villeroy Says'

 The European Central Bank has succeeded in bringing inflation under control after a surge driven by the end of the Covid-19 pandemic and Russia's invasion of Ukraine, the head of France's central bank said Friday.

The ECB Thursday lowered its key interest rate to 2% from 2.25%, its eighth cut since June 2024. That move followed figures that showed the annual rate of inflation was 1.9% in May, below the ECB's 2% target.

The central bank's economists expect inflation to average just 1.6% next year, before rising back to 2% in 2027.

"We have won the battle against inflation in Europe," Bank of France Governor Francois Villeroy de Galhau said in a television interview.

Eurozone prices rose sharply after the invasion of Ukraine sent energy and food prices soaring, and inflation hit a high of 10.6% in October 2022. The ECB responded by raising borrowing costs from July 2022, taking its key rate from a negative half a percentage point to a peak of 4% in September 2023.

Speaking to reporters Thursday, ECB President Christine Lagarde was more hesitant about declaring victory.

"Victory laps are always nice, but there is always another battle," she said.

Some economists worry that the next battle might be to stop inflation falling well below the 2% target, a return to the challenge the ECB faced in the decade leading up to the Covid-19 pandemic. That could again be a problem if Europe faced a long trade conflict with the U.S. that delivered a severe blow to growth.

Villeroy, who is a member of the ECB's governing council, said he does not view a long period of falling prices as a threat.

"I don't believe in the opposite disease of deflation," he said. "I don't think it's a threat today. If there were ever a risk, we would have the means to act against this threat of deflation. We have done so successfully in the past."

The ECB signaled Thursday that it is close to the end of its sequence of rate cuts unless the eurozone economy suffers a bigger blow from tariffs than its economists anticipate.

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