ECB’s Villeroy Says Inflation Fears Are ‘Greatly Exaggerated’

European Central Bank Governing Council member Francois Villeroy de Galhau said concerns about increasing euro-area inflation are overdone for now.

“Some people seem to be worried about a return of inflation,” he said in his new year’s address to financial executives in Paris. “That’s greatly exaggerated. We aren’t even at our target of 2 percent.”

While the region is seeing the fastest price growth in more than three years, driven mainly by a surge in the cost of oil, it’s still at only about half the pace where the ECB would like it. Data published last week showed prices rising 1.1 percent in December, while underlying price growth hasn’t topped one percent in more than a year.

Villeroy said that the increase in euro area inflation will be “gradual” and predicted that inflation rates of euro area countries will converge during 2017.

The Governing Council holds a monetary-policy meeting next week. Though signs that the ECB’s price-stability target is in sight could spur more hawkish members of the Governing Council to call for an exit from quantitative easing, Executive Board member Yves Mersch said last week that the ECB “never” reacts to monthly inflation data “unless there is something that would terribly invalidate our projections.”