DAVOS, May 23 — European Central Bank rate hikes in July and September are essentially a done deal as fighting off high inflation must take priority, French central bank chief Francois Villeroy de Galhau said today.
ECB President Christine Lagarde flagged the rate hikes earlier today, making the case for lifting the minus 0.5 per cent deposit rate out of negative territory by the end of September, before further rate increases later on.
“If you look at President Lagarde’s statement this morning, the deal is probably done because there is a growing consensus,” Villeroy, who also sits on the ECB’s rate-setting Governing Council, told a panel at the World Economic Forum.
Villeroy argued that inflation is not only high, nearly four times the ECB’s 2 per cent target, it is becoming increasingly broad, with underlying figures also moving well above the ECB’s 2 per cent target.
“This is why we have to normalize monetary policy,” he said. “I would play down the idea of a short-term trade-off between inflation and growth. In the short run, our priority is clearly... fighting inflation.” Villeroy added that he did not expect the bloc to suffer a recession as the economy is showing plenty of resilience, with the most recent indicators pointing to continued expansion, driven by services. — Reuters
