(Bloomberg) -- The European Central Bank won’t need to return to ultra-low interest rates as inflation will settle in a new regime close to its 2% medium-term target, according to Governing Council member Francois Villeroy de Galhau.

“I personally believe that once we will have fought inflation and come back to 2% we will be in a new inflation regime, probably closer to our target,” the Bank of France Governor said Tuesday. “Then we will have probably in the medium term a level of interest rate that will be more normal than in the recent past.” 

Addressing an online conference, Villeroy said that in the shorter term the ECB will focus on tackling underlying inflation, which is “much to high.”

“Monetary policy has to act and monetary policy is able to act to counter the rise in underlying inflation,” Villeroy said. 

Other comments: 

  • “The ECB will bring back inflation toward 2% by the end of 2024 or 2025. It’s not only our forecast it’s also our commitment”
  • “What we see so far on activity in the euro area, be it in Germany, in France or elsewhere, is better news than what we feared some months ago. We will very probably avoid a recession this year”
    • “I don’t think we have to choose between fighting inflation or avoiding recession; we will avoid a recession and we will fight inflation. This better economic environment probably makes our monetary task easier”



©2023 Bloomberg L.P.