ECB’s Villeroy: Perseverence Now the Main Key Virtue, Given Transmission Lag

28 July 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Friday said that with monetary policy transmission requiring time, perseverance had become the principal virtue to govern coming policy decisions.

In a statement published on the website of the Banque de France, which he heads, Villeroy said, ‘The persistence of underlying inflation that is still too high justifies a further rise in interest rates to 3.75%, a level that is still much lower in Europe than that of the US central bank (5.25/5.50).’

‘But our growing confidence in the path of disinflation towards 2% by 2025 is based on the good monetary policy transmission underway’, he continued.

‘Given the time needed for full transmission, perseverance is now the first key virtue’, he said. ‘The second is pragmatism: our decisions at forthcoming meetings will henceforth be open-ended, and will be guided entirely by future economic data, as [ECB President] Christine Lagarde indicated yesterday.’