ECB’s Villeroy: Monetary Policy Should Remain Accommodative For Years

14 April 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said Wednesday that ECB monetary policy should remain accommodative for years.

In an interview with Bloomberg, Villeroy, who heads the Bank of France, said an exit from the pandemic emergency purchase programme (PEPP) was possible by the currently planned date of March 2022, but indicated that the potentially modified asset purchase programme (APP) could pick up where the PEPP had left off.

‘Obviously, our monetary policy should remain accommodative for the years to come’, but the tools relied on could ‘evolve’, he said. In particular, he said following a strategy review that makes the symmetry of the ECB’s inflation objective clear, ‘we should be ready in our forward guidance to overshoot … 2% temporarily, taking also into account the past inflation shortfall.’

Asked whether the PEPP could start to be phased out next quarter, Villeroy did not respond directly, citing instead the assertion of the introductory statement that the PEPP would run until at least next March but in any case until the crisis phase was over.

‘We are not yet there’, he said. ‘We have time to judge, as we say. But in our baseline scenario at present, the crisis phase could be over by March ’22. So, we could possibly exit PEPP by March ’22, PEPP net asset purchases.’

Such an exit ‘would not mean an abrupt tightening of our monetary policy’, given continued reinvestment of maturing PEPP assets, he said. ‘We could also have net asset purchases with our other programme, APP, possibly somewhat adapted.’

The US fiscal stimulus would ‘help’ European economic figures, he said.