ECB’s Villeroy: Rise in the Dollar Has Tended to Be Interrupted Recently

17 November 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Thursday noted the recent failure of the dollar to continue strengthening.

In an interview with French regional daily Le Progrès, Villeroy, who heads Banque de France, said that ‘[t]he current situation is that of a strong dollar, against all other currencies, and not that of a weak euro.’

‘It favours our exporters, but it penalises our imports and therefore contributes to inflation’, he continued. ‘Our monetary policy aims to control this inflation. The rise in the dollar has by the way tended to be interrupted in recent weeks.’

Higher government spending is not the answer to inflation, he said. ‘What will permanently reduce inflation is the normalisation of our monetary policy: we will bring inflation down to 2% in two or three years’, he said.

Asked whether higher interest rates would restrain the housing market, Villeroy observed that average mortgage rates over the last two decades was above 3%, but the real estate sector was nonetheless well financed.

The French economy was shown by Banque de France’s latest business survey to be resilient despite ‘many uncertainties for the future’, he said. ‘GDP could be up very slightly in the fourth quarter.’

Next year, he reminded, projections call for growth between -0.5% and 0.8%. ‘At this stage, we see no reason to be more negative’, he added. ‘And we do not believe in a hard landing for the French economy.’