“Most of the way” has been covered by the European Central Bank (ECB) in terms of raising rates, Banque de France Governor François Villeroy de Galhau insisted on Friday the day after a new increase of 0.25 point of its key rates.
Despite calls from other European governors for several new rate hikes at upcoming ECB meetings, recent data show that our monetary policy (…) is working, the governor assured in a speech in Paris.
While central banks around the world have raised rates sharply since 2022 in an attempt to counter rising prices, inflation has peaked in the Eurozone and core inflation (which excludes lowest-priced products more volatile, Ed) has decreased for the second consecutive month, welcomed Franois Villeroy de Galhau.
With a 400 basis point hike, carried out gradually, the ECB has clearly come most of the way and is clearly in restrictive territory – in other words, its action is causing the economy to slow down.
After a meeting of the ECB, the president of the institution Christine Lagarde said Thursday that a further rate hike at the July meeting was very likely.
We still have a long way to go. We have not arrived at our destination, she insisted.
On Friday, Bundesbank Governor Joachim Nagel, quoted by Bloomberg, stated more explicitly that the ECB might have to continue raising rates after the summer, for example at its September meeting.
If underlying inflation remains at 5% over one year in the coming months, we will continue to increase them even beyond September, for his part judged the Belgian central banker Pierre Wunsch, also quoted by Bloomberg.
No one should jump to premature conclusions about our timing or our terminal rate, and recent market volatility seems somewhat excessive, Franois Villeroy de Galhau replied on Friday.