François Villeroy de Galhau, the President of the Bank of France, has made statements regarding the European Central Bank's (ECB) inflation target, opposing some French economists' proposal for a higher inflation target above 2 percent. Villeroy cautioned against raising the ECB's inflation target, stating that interest rates are approaching their peak and will transmit their effects on the economy for a sufficient period. #inflation #ECB #BankOfFrance
ECB's Inflation Target:
Villeroy, who is also a member of the ECB's Governing Council, emphasized the ECB's inflation target in a speech at an economics conference in Aix-en-Provence. He stated that the ECB aims to reduce inflation to the 2 percent target by 2025. This target has been widely adopted by major central banks for a considerable period and aims to ensure price stability.
Proposals for a Higher Inflation Target:
French economist Olivier Blanchard, formerly the Chief Economist of the International Monetary Fund (IMF), has long advocated for a higher inflation target beyond the commonly accepted 2 percent. Blanchard argues that the flexibility brought by this higher target outweighs potential costs. However, Villeroy maintains the importance of adhering to the current inflation target and suggests that a target above 2 percent could have negative effects on the economy.
French economist Patrick Artus has also proposed a higher inflation target during a conference held last Saturday. French Finance Minister Bruno Le Maire stated that there should be no taboo on exceeding the limits when economists are discussing this issue. These debates highlight the differing opinions on the ECB's inflation target and indicate that this topic will be further discussed in the future.