Banque de France Governor Francois Villeroy de Galhau called on central banks on Tuesday to coordinate their monetary policies because their actions have effects on other economies.
“There should be mutual predictability of policy-making. We will achieve the closest solution to cooperation if we avoid major surprises between policy makers”, he said during a speech at Columbia University in New York. He thus quoted comments from his counterpart at the American central bank (Fed), Jerome Powell, who had said, in 2019, that “pursuing our national mandates in this new world requires that we understand the anticipated effects of these interconnections and integrate them into our political decision-making”.
Towards “neutral” rates
François Villeroy de Galhau also indicated that the European Central Bank (ECB) should arrive “before the end of this year” at said interest rates “neutral”that is to say that do not stimulate or slow down the economy, which he evaluates at 2%. “We probably won’t stop rate hikes here, but we will enter another part of the journey: a more flexible, and perhaps slower, part based on accurate economic assessment meeting by meeting”he detailed.
The Governing Council of the European Central Bank (ECB) had judged, at its September meeting, that the current economic slowdown would not bring inflation down enough, which had led to a historic increase of 0.75 points. of the three key rates in order to cool the economy in the hope of slowing the surge in prices. Inflation in the euro zone reached 10.0% over one year in September.