Central Banks
ECB’s Villeroy Outlines a Plan for Cautious, Flexible Tightening
- Villeroy urges flexible pace after reaching neutral near 2%
- ECB should start slowly when it begins balance sheet reduction
Francois Villeroy de Galhau, governor of the Bank of France.
Photographer: Jason Alden/BloombergThis article is for subscribers only.
The European Central Bank should get interest rates to near 2% by year end with sharp increases before taking a more flexible approach and potentially embarking on a cautious shrinking of its balance sheet at a later stage, Bank of France Governor Francois Villeroy de Galhau said.
With inflation at a record high of 10% in the euro area, the ECB must not let fears of recession “derail” its plans to get rates from 0.75% to a neutral setting -- deemed to neither stimulate nor slow the economy -- of “a bit less than 2%,” the French policy maker said.