ECB’s Villeroy: No Justification for Further Rate Increase

6 October 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Friday that he thought there was no reason for further ECB rate hikes.

In an interview with German financial daily Handelsblatt, Villeroy, who heads the Banque de France, said that inflation indicators had been good.

‘[W]e may consider it [a sharp rise in long-term rates] excessive, but it actually contributes to tightening the financing conditions of the European economy', he said. 'So today, I think there is no justification for a further increase in ECB rates.'

‘We must now speak rather of a plateau, and we will remain for the necessary time on this plateau’, he said.

‘The message from the September Council meeting is that from now on, duration counts more than level, given the lags in transmitting our monetary decisions.’

There were no signs of a price-wage spiral, he said with respect to the acceleration of nominal wages. ‘Rather’, he said, ‘we expect a deceleration in the coming quarters, following the fall in inflation.’

‘The rise in petrol prices therefore does not prevent the fall in overall inflation', he affirmed. 'That said, we will be vigilant against the risks of contagion on inflation expectations and negotiations.’

‘But we are not faced with the dark scenario’, he said. ‘I believe that our monetary policy can and must now aim for a ‘soft landing’ for the Eurozone: we will emerge from inflation, and we will probably do so without a recession.’