European Central Bank Governing Council member Francois Villeroy de Galhau said the euro-zone economy is unlikely to experience a deep slump as interest rates are lifted to tackle soaring inflation.
(Bloomberg) — European Central Bank Governing Council member Francois Villeroy de Galhau said the euro-zone economy is unlikely to experience a deep slump as interest rates are lifted to tackle soaring inflation.
The Bank of France governor told French radio on Tuesday that there’s less uncertainty now over the outlook for his home country and the 19-nation euro area.
“France will likely avoid recession — I can’t say for sure because much uncertainty remains, there could be small slowdown,” Villeroy said.
“But what I can say for certain is that France and Europe will avoid a hard landing. There will be no catastrophic crash of our economies.”
Turning to the path for rates, he said the aim is to drag price growth back to the 2% target within two years from more than five times that level now.
“I want to say that we’ll do what’s necessary to bring inflation back to 2% in 2024,” Villeroy said.
“If there are unexpected factors that slow this down it could be 2025, but we are aiming for the end of 2024.”
While easing the pace of rate hikes last week, the ECB has made clear that it has no intention of halting them any time soon — especially as the economic backdrop improves.
Any slowdown in growth next year “won’t significantly lower euro-zone inflation,” Slovenia’s Bostjan Vasle said later Tuesday.
Speaking Monday, ECB Vice President Luis de Guindos had urged that rate increases continue at a similar speed to the latest half-point move — a sentiment echoed Tuesday by Slovakia’s Peter Kazimir, who urged a stable pace with inflation risks still skewed to the upside.
Bundesbank President Joachim Nagel also struck a hawkish tone, saying the ECB remains “a long way” from achieving its medium-term price goal.
“Inflation is persistent,” he said in interview with Germany’s Stern magazine.
“That’s why we have to be more persistent.”
–With assistance from Jan Bratanic, Daniel Hornak and Iain Rogers.
(Updates with more ECB officials starting in seventh paragraph.)
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