ECB’s Villeroy: Interest Rates Should Peak by Summer
24 January 2023
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Tuesday said that euro area interest rates would probably hit their terminal level by the summer.
In an interview with French weekly news magazine l’Express conducted jointly with Bundesbank President Joachim Nagel, Villeroy, who heads Banque de France, said that inflation was ‘no longer only linked to energy, it now affects all sectors, including services’ and that ‘[t]his is why monetary policy is effective.’
‘We will probably have reached the peak in interest rates by next summer, and inflation will come down to the 2% level by the end of 2024 to 2025’, he continued.
Less worrisome than the current level of French public debt was its trend, he said, noting that it had amounted to 20% of GDP in 1980, versus 112% now. Society had to break with the notions that there was no cost to debt and that the road to growth was public spending.
‘[I]f that were the case, we would be the world champions of growth!’, he said. ‘We absolutely must have a debate on the quality of our public spending. It costs about 10 points of GDP more than that of our European neighbors. I deeply believe in our common social model, but only if we are more challenging in our French public efficiency.’