ECB Probably Has a Few More Hikes Left, Villeroy Says
5 May 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank is likely to undertake further rate hikes at its upcoming meetings, ECB Governing Council member François Villeroy de Galhau said on Friday.
In an interview with French radio station Radio Classique, Villeroy, who heads the Banque de France, said that he had argued for the ECB to reduce the pace of its rate hikes at Thursday’s Governing Council meeting.
The ECB has ‘covered most of the journey, even though there are probably a few more hikes left’, he said. ‘But now perseverance counts more than speed’, he said, adding that ‘we will be tenacious in beating inflation.’
Reflecting on Thursday’s meeting, he said that he had ‘argued that we should decide on more limited rate increases from now on’. He added that he wanted to ‘underline this change of pace because it is an important signal.’
‘We have decelerated not because our determination to beat inflation has diminished’, he said, but because it was ‘consistent with the rules of the game’. The ECB had previously committed to make hikes dependent on the incoming data, paying particular attention to the development of core inflation, the economic outlook, and the transmission of monetary policy. The latter was the reason for the decision to step down to 25bp, he said: ‘what played a role in yesterday's decision was […] the transmission of monetary policy.’
‘The effect of what is in the pipeline is extremely important for the economy and for fighting inflation, we have had confirmation of this [...] in the bank lending survey, which shows that the central bank's hikes are percolating through the economy’, he said.