The governor of the Bank of France, François Villeroy de Galhau, judged Thursday that the ECB’s interest rates, kept unchanged during the last monetary policy meeting, would no longer progress “barring shock” and “barring surprise »
“We are winning the battle against inflation” and “barring any surprises, barring any shock, the increase in our key rates is over,” he declared in a speech, adding however that he was “too early to talk about falling”.
During its meeting at the end of October, the European Central Bank (ECB) left its rates unchanged, after ten increases in a row to calm the inflation which set in after the Covid-19 pandemic and the war in Ukraine.
“I am not saying we have already won” the battle against inflation, judged Mr. Villeroy de Galhau. But he said he was convinced that “we will bring inflation back to 2% by 2025”.
“This applies to France as well as to the euro zone,” he added.
At 2.9% over one year in October, inflation in the euro zone has fallen significantly in twelve months, when it exceeded 10% for a comparable month a year ago.
For the governor of the Banque de France, member of the ECB Governing Council, “the remedy” of rising rates “is not pleasant” but “it is effective”.
The question of a further increase has not yet been ruled out by all those responsible for monetary policy in the euro zone.
Isabel Schnabel, a member of the ECB board, called last week not to “close the door to a further rise” in interest rates on the potentially unstable path to bringing inflation back to 2%.
“After a long period of high inflation, inflation expectations are fragile and further supply-side shocks can destabilize them, threatening price stability in the medium term,” she said.
Luis de Guindos, vice-president of the institution, however judged Thursday that maintaining rates at their current level “will contribute significantly to the fall in inflation” towards the targeted level.
He notably noted in an interview published on the ECB website that underlying inflation, that is to say the rise in prices excluding energy and fresh products in particular, “has calmed down”.
“We have passed the peak of this underlying inflation,” Mr. Villeroy de Galhau also judged.