The Governor of the Banque de France Franois Villeroy de Galhau showed his determination to fight inflation on Saturday during a speech at a meeting of bankers in Jackson Hole, United States.
Bringing inflation down to 2% is our responsibility; our will and ability to deliver on our mandate commitments is non-negotiable, the governor said, according to his speech obtained by AFP.
On Friday, US Federal Reserve Chairman Jay Powell warned that a return to price stability will take time and lead to a long period of weaker growth.
Consumer price inflation in the euro zone in July reached a record level of 8.9% over one year. In order to stem it, the European Central Bank (ECB) raised its three main interest rates by half a percentage point at the end of July, bringing them between 0% and 0.75%.
According to observers, it should raise them again at its next monetary policy meeting on September 8, although the economic situation has darkened this summer in the euro zone.
We can have a gradual approach, but we must not be slow and delay the normalization (of monetary policy, editor’s note) until higher inflation expectations force us to hike rates aggressively, justified the governor.
For Franois Villeroy de Galhau, the neutral key interest rate, compatible with balanced long-term growth, is probably between 1% and 2%.
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Until this level is reached, the path to follow is clear and we can commit to it resolutely and durably, including by offering some visibility to economic players on the pace of future rate hikes.
While acknowledging that at least for Europe, growth prospects for next year have been revised downwards due to energy and gas prices as well as exchange rate developments, the Governor of the Banque de France does not rule out a rise in rates beyond the neutral level.
Have no doubt that at the ECB, we will raise rates if necessary beyond normalization, assures Mr. Villeroy de Galhau in his speech.
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