ECB Close to ‘High Plateau’ for Interest Rates, Villeroy Says

9 July 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank will soon reach the peak of its hiking cycle, which will resemble a plateau, as rates will be held at a high level for a long time, Governing Council member François Villeroy de Galhau said on Sunday.

Speaking at the Rencontres Économiques conference in Aix-en-Provence, France, Villeroy, who heads the Banque de France, said that ‘in the euro area, I believe we will soon reach the high point of interest rates.’

‘But when I say high point this isn't a peak, rather it will be a high plateau, on which we will have to remain for a sufficiently long time to fully transmit all the effects of monetary policy’, he added.

Regarding an upwards revision of the ECB’s inflation target to 3%, he said: ‘I believe it's an example of a false good idea. If we announced that our inflation target was 3% instead of 2%, lenders would immediately demand higher interest rates.’