In a lecture delivered overnight, ECB Governing Council member Francois Villeroy de Galhau stressed the importance of maintaining “agile pragmatism” in adjusting the current restrictive monetary policy.
He emphasized that the risk of reducing the ECB’s restrictive stance too late “could indeed become more significant” to the risks of acting prematurely.
Villeroy noted the “risk that inflation undershoots, especially if growth remains subpar”.
He further added, “If we are next year sustainably at 2% inflation, and with still a sluggish growth outlook in Europe, there won’t be any reasons for our monetary policy to remain restrictive, and for our rates to be above the neutral rate of interest.”
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