ECB’s Villeroy: Inflation is Too Broad, Requiring a Normalisation of Monetary Policy

2 June 2022

By David Barwick – PARIS (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Thursday said that high core inflation required that monetary policy be normalised.

In a speech in Paris, Villeroy, who heads Banque de France, said that ‘Europe is moving away from an omnipresent monetary policy, which has helped it deal with financial crises and stabilise the euro area while fighting deflation risk and enhancing growth; monetary policy is now focused again on how to rein in inflation.’

‘Inflation is not only too high, but also too broad, looking at core inflation’, he said, citing May’s 3.8%. ‘This requires a normalisation of monetary policy – I will not talk about it today, as we are in the silent period before our decisive Governing Council meeting next week.’

Higher interest rates will, along with debt incurred due to the pandemic, constrain fiscal policy ahead, he said.

‘Furthermore, in the two next years, the context will be one of slower growth, or even according to some fears of economic stagnation’, he said.