ECB’s Villeroy: We Provide Policy Orientation in Communication when Possible
30 October 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Wednesday that the ECB provided markets with some ‘policy orientation’ on the journey to the inflation target when this was possible.
In a speech and the following Q&A session at an event hosted by the European Institute and the LSESU French Society, Villeroy, who heads the Banque de France, said, 'I think the rule of monetary policy is to reduce volatility and give more certainty, confidence to economic agents because they can be sure that we will come back to the inflation target'
'And if possible - if possible - we give some policy orientation about the path, the journey we will follow to the inflation target', he continued. 'I express "if possible" because if we have many questions, to have too strict, too long forward guidance can be misleading.'
The ECB became 'a bit more cautious on forward guidance', he said, suggesting that 'between full forward guidance and full pragmatism - meeting by meeting - you can have a soft signalling approach.'
It was too early to claim victory on the battle against inflation, he said.
‘I think victory against inflation is in sight. I think it is a good way and this is why we started to decrease our interest rates at the ECB’, he said.
On a reflection about the inflation target, Villeroy said that keeping inflation right at the 2% objective at all times is ‘never realistic nor necessary’.
‘If you say: target is to meet each month the 2%, then you make mistakes’, he said.
The 2% goal had been proven successful in anchoring expectations, according to Villeroy, who rejected the idea that the ECB would revisit the inflation target in the next strategy review.