ECB’s Villeroy: Will Do What Is Necessary to Get Inflation Back to 2% over Time

24 January 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Monday said that the ECB would do what was necessary to achieve price stability. 

Interviewed on French radio station Europe 1, Villeroy, who heads Banque de France, reiterated his prediction that French inflation would be back under 2% by year’s end on the back of stabler energy prices and less severe supply constraints.

'You can never be sure of a forecast, but this is the quality forecast that we are making today’, he said. ‘It is not a blind certainty, and if necessary the European Central Bank and the Banque de France will do what is necessary to bring inflation back to around 2% over time.’

Villeroy cited earlier comments by ECB President Christine Lagarde to the effect that monetary policy ‘must not be a brake on growth, nor must it be an accelerator of inflation.’

‘Today we have to normalise monetary policy gradually, this is not the situation in Europe’, he said. ‘We must not do it too late either, so we are very pragmatic, looking at the real evolution of the economy and inflation. This gives the French a guarantee that we will bring inflation down to around 2% over time.’

Monetary authorities ‘are extremely vigilant about inflation’, he said.

Turning to the domestic economy, Villeroy said the picture today was one of ‘good growth and … too much inflation’, while in two years, ‘we should have good inflation, back to around 2%, but on the other hand we wouldn't have enough growth.’

He urged a ‘progressive reduction’ in French indebtedness over the next 10 years.