‘I Think We Are Not Very Far From the Finish Line’, ECB’s Villeroy Says

11 July 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Tuesday that he thought ECB rate hikes would soon reach their conclusion.

In an interview with French radio network France info, Villeroy, who heads the Banque de France, said that ‘personally, I think we are not very far from the finish line’ of the ECB’s monetary tightening.

The ECB ‘must not let the disease [of inflation] settle’ and was therefore using the ‘remedy’ of interest rates to fight rising prices, he said.

The central bank was ‘not very far from the high point of interest rates’, he noted, ‘but then, once we reach that high point, it may rather be a plateau. We will have to stay at this plateau long enough to overcome the disease.’

It would be necessary to keep rates at a high level because ‘when administering a remedy, you have to give it time to take effect’, he said.

‘We have the beginnings of good news’ regarding inflation, which was falling fast, he noted, although it was ‘mainly the deceleration of energy’ contributing to this trend.

‘The prices that continue to rise too fast are food prices’, he said. ‘There, we also hope to see a deceleration in the second half of the year […] because global agricultural prices have started to turn around.’

The ECB predicted ‘that inflation will continue to decrease and return to around 2% by 2025’, he said, commenting that ‘the decrease has begun and should be quite noticeable in 2024’, with inflation reaching ‘an average of 2.5% in 2024’.