ECB’s Villeroy: Direction Is Clear, Monetary Policy Will Go From Restrictive to Neutral
31 January 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Friday that the ECB’s monetary policy was clearly going from being restrictive to neutrality.
In a speech at an event hosted by OMFIF in London, Villeroy, who heads the Banque de France, said that ‘[w]ith such a “disinflationary slowdown”, the direction of the travel is clear: our monetary policy will go from restrictive towards neutral’.
The ECB’s moves towards neutral should help deliver an economic recovery at a gradual pace while ensuring that inflation stays at the 2% target, according to Villeroy.
‘[W]e are precisely on track in our victorious fight against inflation’, he said.
This victory was ‘the result of luck’, including the decline in energy prices, but was also due to the ECB’s monetary policy, he said.
‘Looking ahead, we should be sustainably around our 2% inflation target by this summer’, he indicated.
French flash CPI data for January were ‘good news on this road’, he said, as services price pressures appeared to be decreasing.
‘We see significant wage deceleration and are hence confident on core inflation decrease, including services’, he added.
Villeroy described the recent GDP data for the Eurozone in Q4 as ‘disappointing GDP stagnation’ and said it confirmed that risks to growth were ‘clearly tilted to the downside.’
The pace and the timing of future rate cuts to reach the neutral rate should be driven by ‘agile pragmatism’ and the ECB’s ‘data driven approach’, he said.
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