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MNI BRIEF: ECB Rates Should Turn Positive This Year - Villeroy

(MNI) London

Excessive caution risks fueling inflation expectations, the governor of the Banque de France says in a speech.

Euro area interest rates should turn positive this year, Banque de France governor Francois Villeroy de Galhau said in a speech on Friday in which he also suggested bank liquidity shortfalls during the process of monetary policy normalisation could be offset by new longer-term refinancing operations.

“Barring unforeseen new shocks, I would think it reasonable to have entered positive territory by the end of this year,” he said, adding that the ECB’s commitment to raising rates gradually “shouldn’t mean excessive caution or inertia", which could risk sending inflation expectations higher.

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Euro area interest rates should turn positive this year, Banque de France governor Francois Villeroy de Galhau said in a speech on Friday in which he also suggested bank liquidity shortfalls during the process of monetary policy normalisation could be offset by new longer-term refinancing operations.

“Barring unforeseen new shocks, I would think it reasonable to have entered positive territory by the end of this year,” he said, adding that the ECB’s commitment to raising rates gradually “shouldn’t mean excessive caution or inertia", which could risk sending inflation expectations higher.

Keep reading...Show less