it will be reduced to “2% within two or three years”, announces François Villeroy de Galhau


Consumer price inflation accelerated in October to 6.2% year on year, after two months of slowdown. This rebound in inflation would be due to the acceleration in the prices of energy, food and manufactured products, said INSEE when revealing this figure. Are we headed for an inflation tsunami in early 2023 with double-digit inflation as Michel-Edouard Leclerc recently asserted? “I don’t believe it”, launches François Villeroy de Galhau, governor of the Banque de France, at the microphone of Europe 1 on Thursday. “Inflation is too high in France, that’s true, we are going with Christine Lagarde to do what is necessary to bring inflation down to 2% within two or three years,” he announced.

Inflation, a disease?

We have to go back to June 1985, the month during which prices increased by 6.4% over one year, to find a level of inflation higher than this first estimate. François Villeroy de Galhau recently declared that inflation was “a disease of the economy”. At the microphone of Europe 1, the Governor of the Banque de France confirms his proposals and adds that, “like any disease, it is better to catch it in time with a proportionate remedy rather than letting it develop and then having to apply a horse treatment”.

Inflation, which was supposed to be temporary, risks establishing itself over time. François Villeroy de Galhau explains: “We said, but like everyone, like all forecasters, like all international organizations, that inflation would be temporary, because it first appeared at the exit of Covid. A year ago, there was a very strong recovery. But what has happened since then and objectively, no one expected? It’s the Russian invasion of Ukraine. That’s it which turned a temporary shock into a lasting inflation risk.”

Towards an increase in key rates?

To achieve inflation of 2% within two or three years, the Banque de France and the European Central Bank plan to increase key rates, short-term interest rates. “You have to find a fair way and it is estimated that it is around this inflation of 2%. So in practice, we are in this phase of normalization of monetary policy. The key rates of the European Central Bank are today at 1.5%, it is estimated that there is a zone of normalization which is around 2%. I think that we will be there by the end of this year and we will see beyond”, he concluded .


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