Villeroua de Gallo (ECB): Inflation very high and widespread

The European Central Bank (ECB) must cut economic stimulus measures as inflation rises sharply and inflation widens, said François Villeroua de Gallo, France’s central banker and board member.

In particular, according to Bloomberg, speaking at an economic conference in Paris, the head of the Bank of France stressed that even structural inflation – a measure that excludes the impact of food and energy prices – is above the ECB target (for 2%), having run 3.8% in May.

According to Villeroua de Gallo, next week’s ECB meeting will be “decisive” for a response.

“Inflation is not only very high, but also very broad,” Villeroua said, adding that “this requires a normalization of monetary policy – I mean normalization, not austerity.”

The French central banker did not elaborate on the two-day ECB meeting, which ends on June 9.

In previous comments, the bank’s president, Christine Lagarde, had suggested completing bond purchases and raising interest rates by 25 basis points in July and September.

In the same vein, Villeroua de Gallo stressed that the process should be “gradual but decisive”, although more aggressive members of the ECB’s board have called for more borrowing costs.

The French central banker also said that a less accommodating policy combined with greater government budget constraints means that Europe would have to combine its “less creative” means in the long run to achieve its digitalisation and green transition goals. .

“Fiscal policy will be further curtailed by itself due to the high public debt of the post-pandemic era and rising interest rates,” Villeroua said.

“In addition, over the next two years there will be a framework for slower growth or even, according to some concerns, economic stagnation,” he concluded.