ECB Villeroy: risk of doing too much & risk of doing too little now symmetrically balanced

Francois Villeroy de Galhau, Governor of Banque de France, and a Governing Council member at the European Central Bank

  • If we can reach our inflation target with a soft landing rather than
    a hard one, it’s much better
  • In my judgement,
    these risks are now at least symmetric, we always can do more if
  • The risk of doing
    too much on rates needs to be balanced against the risk of not doing
  • In the risk of doing
    too much, with a recession and sharp fall of inflation, we would have
    to rapidly reverse course
  • ‘testing until it
    breaks’ is not a sensible way to calibrate monetary policy
  • Maintaining the
    current level of interest rates will bring down inflation
  • Have to monitor
    current oil price rebound for possible effects on inflation
    expectations, wages
  • If markets fully
    incorporate our strategy, they shouldn’t expect cuts before a
    sufficiently long time

Villeroy also spoke over the weekend with the same sort of message:

The ECB is walking a fine line, its current forecast is that inflation will hold above 3% next year
and sees it below
its 2% target only in the final quarter of

This article was written by Eamonn Sheridan at Source