The head of the Central Bank of France, Francois Villeroy de Galo, said that the European Central Bank intends to raise rates as high as necessary to curb inflation. At the same time, Villeroy noted that the pace of rate increases may slow down with the beginning of the new year. The ECB representative acknowledged that core inflation (excluding energy and food prices), which the central bank cannot control, has reached 4.8% and has acquired too wide coverage. Villeroy also stressed that the increase in rates will have positive consequences for the net income of banks, since now European banks are more stable than market participants fear. In general, the regulator intends to avoid provoking shocks in the markets or too sharp tightening of financial conditions for households and companies. The head of the Bank of France also suggested that the ECB should raise interest rates by the end of the year to a level at which they will not stimulate or slow down economic growth. According to his estimates, this level is in the region of 2%. And only after that, the ECB can move on to the second stage of the monetary policy normalization cycle, which, according to Villeroy, will be «more flexible and, possibly, slower.»
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