• Focus on April hike is premature
• The ECB would have no hesitation to act if and when necessary
• There’s no rush to act at the moment
• There’s no predetermined rate path
• The ECB will need critical mass of data before acting
• Our vigilance is first and foremost on the risk of persistent inflation
• Underlying inflation is still close to target

ECB’s Villeroy reiterated that focusing on a potential interest rate hike in April is premature as the bank maintains a cautious and data-dependent stance. While Villeroy made it clear that the ECB would have no hesitation to act if and when necessary to maintain price stability, he reiterated that there is no rush to act at the current moment.

The governor noted that the ECB will need a critical mass of data before making any decisive policy shifts. Villeroy highlighted that the bank’s vigilance is first and foremost focused on the risk of persistent inflation, which remains the primary concern for policymakers. Despite recent global economic volatility and energy price fluctuations, he pointed out that underlying inflation is still close to the bank’s target.

Villeroy’s comments suggest that while the central bank is prepared to tighten policy if inflationary pressures become entrenched, it prefers a patient wait-and-see approach.

The market is currently pricing in just 20% probability of an April hike but that increases to 70% for June. In total, the market expects the ECB to deliver two rate hikes by year-end.