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

<p>Francois Villeroy de Galhau, Governor of Banque de France, and a Governing Council member at the European Central Bank</p><ul><li>
If we can reach our inflation target with a soft landing rather than
a hard one, it’s much better</li><li>In my judgement,
these risks are now at least symmetric, we always can do more if
needed</li><li>The risk of doing
too much on rates needs to be balanced against the risk of not doing
enough</li><li>In the risk of doing
too much, with a recession and sharp fall of inflation, we would have
to rapidly reverse course</li><li>'testing until it
breaks' is not a sensible way to calibrate monetary policy</li><li>Maintaining the
current level of interest rates will bring down inflation</li><li>Have to monitor
current oil price rebound for possible effects on inflation
expectations, wages</li><li>If markets fully
incorporate our strategy, they shouldn’t expect cuts before a
sufficiently long time</li></ul><p>Villeroy also spoke over the weekend with the same sort of message:</p><ul><li><a href="https://www.forexlive.com/centralbank/ecbs-villeroy-expects-the-banks-interest-rates-to-peak-soon-and-plateau-for-a-long-time-20230709/" target="_blank" rel="follow" data-article-link="true">ECB's Villeroy expects the Bank's interest rates to peak soon, and plateau for a long time</a></li></ul><p>—</p><p>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
2025.</p>

This article was written by Eamonn Sheridan at www.forexlive.com.