ECB’s Villeroy: ‘Extremely Clear’ Supporting Recovery Is Our Only Goal

27 August 2020



By David Barwick – PARIS (EconoStream) – European Central Bank Governing Council member François Villeroy de Galhau on Thursday declared supporting the economic recovery to be monetary policy’s dominant objective at present.

Speaking at a panel discussion during a French business conference, Villeroy, who heads the Bank of France, expressed a strong preference for the ECB’s strategic review to preserve a medium-term inflation objective.

‘We are maintaining, and we will maintain, low interest rates and abundant liquidity that facilitates access to credit’, he said. The orientation of monetary policy at such a difficult time as the present is straightforward, he affirmed. ‘As long as inflation remains weak – 0.4% in the Eurozone in the month of July, too weak – our only goal is extremely clear: accommodate and support the recovery.’

Villeroy called it ‘a good thing’ to conduct a review of the ECB’s monetary policy strategy. ‘… it is essential to have a medium-term inflation target’, he said. Without wishing to prejudge the outcome of the review, he said, ‘you can be assured that a credible and symmetrical inflation objective will remain at the heart of our action.’

The economic recovery in France is proceeding generally in line with what the Bank of France had expected in June, when it issued forecasts calling for growth of about -10% this year, followed by 7% in 2021 and 4% in 2022, he said.

‘… and thus, from today’s perspective, there is no reason to think that the numbers are going to change significantly’, he said, referring to the Bank of France’s update due on September 14. ‘If there is a change, it is without doubt that 2020 is a little better than foreseen and that therefore, mechanically, the rebound in 2021, 2022 is a little less strong than foreseen in the numbers that I cited.’

Villeroy’s characterization of the outlook for forecast revisions suggests that the ECB’s own macroeconomic projections, to be updated on September 10, are also unlikely to change much.