By Marta Vilar – MADRID (Econostream) – Banque de France governor nominee Emmanuel Moulin said on Wednesday that while the European Central Bank’s mandate is to fight inflation, interest rates should not be set as high as possible but instead be compatible with stable economic growth.
Speaking before the French National Assembly, Moulin, formerly chief of staff of the Élysée, said that because the ECB cannot directly control energy prices, “in the event of a temporary shock, central banks should not react immediately if inflation remains transitory.”
The Banque de France’s latest business survey showed that cost increases had begun, he said, meaning policymakers should pay close attention to inflation expectations.
“If they were to become de-anchored, the ECB would be led to react in order to fulfill its mandate,” he said in introductory remarks that echoed comments he had made earlier before the French Senate.
“At this stage, it is still too early to take a position,” he added. “A detailed analysis of the data, particularly on underlying inflation, wage developments and inflation expectations, will be necessary to inform the position of the Governing Council.”
Moulin said the ECB should take into account the impact of its decisions on economic growth, provided this did not compromise its price stability mandate.
He expanded on this point during the Q&A session. “So, of course, the primary mandate, exercised within the ECB Governing Council, is to fight inflation and to have a stable currency and low inflation,” he said. “But the European Central Bank’s objective is not to have interest rates as high as possible.”
The ECB’s aim, he said, was for interest rates to be “compatible with stable growth and with its credibility.”
Beyond its price stability mandate, the central bank was “obviously” supportive of growth and of economic policies favorable to growth, he said.
“So, I think the two are entirely compatible,” he added.
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