ECB’s Villeroy: No Reason to Worry About Stagflation; Recovery Still Very Strong
20 October 2021
By David Barwick – FRANKFURT (Econostream) – Fears of stagflation are unfounded as the recovery is still strong, and no one should question the European Central Bank’s ability to maintain price stability, ECB Governing Council member François Villeroy de Galhau said Tuesday.
At a hearing before the Finance Committees of the National Assembly and the Senate of France, Villeroy, who heads Banque de France, said that fears of stagflation were ‘clearly unfounded: the French and European recovery remains very strong; the related supply difficulties and the energy crisis are undoubtedly leading to a surge in inflation, but this should be temporary and fall back below 2% by the end of next year.’
He downplayed the importance of higher energy prices in the context of the entire basket of goods used to measure inflation. ‘Our monetary policy has to be vigilant, but can be patient’, he said. ‘Don't have any doubts about our ability and willingness to keep inflation around 2% in the medium term.’
France’s chief long-term problem ‘remains recruitment difficulties and the insufficient supply of labour available to companies’, he reiterated.
In other comments, Villeroy paid tribute to Bundesbank President and fellow Governing Council member Jens Weidmann, who had announced earlier in the day his departure at year’s end.
‘He has played a great role in keeping confidence in the euro high in Germany and in Europe throughout a turbulent decade’, Villeroy said.
‘I will miss very much in the Governing Council a friend, a benevolent, convinced architect of Europe who knows France well', he said.