ECB President: “Interest rates must remain high for a long time” | money

“I expect that we will soon reach the highest point in interest rates,” said the head of the French central bank. “But when I say peak, that is not a peak, but rather a high plateau that we need to stay on long enough for all the effects of our policies to pass completely.”

The European Central Bank has increased borrowing costs at a record pace since mid-2022, after a period of historically low interest rates. In this way, the central bank hopes to reduce inflation to a level of about 2%. Villeroy de Galhau expects this to happen before 2025.

He also criticized the statements made by the French Finance Minister at the same conference. He suggested on Saturday that there should be no “taboos” on the question of what should be the ECB’s inflation target. The minister said he was pleased with the debate among economists about the usefulness of an inflation target above 2 percent, which could lead to lower interest rates and make climate investments cheaper.

“I think this is an example of an idea that sounds wrongly good. If we announce our inflation target is 3 per cent instead of 2 per cent, lenders will immediately demand higher interest rates. Banks will then want a risk premium because of the unpredictability.

The ECB front man compared it to the ninth stage of the Tour de France, which ends Sunday with the ascent of the Puy de Dome. If the organizers had placed the finish at the foot instead of at the top of the volcano, “they would have lost all credibility for the rest of the race”.