MNI BRIEF: Growing Confidence Inflation At Target By 2025 -BdF

The Eurosystem has a “growing confidence” that it will achieve its primary 2% medium-term inflation target by 2025 and it would be much better if the ECB could achieve its objective with a soft landing rather than a hard one, Bank of France Governor Francois Villeroy said Monday.

In the speech, Villeroy said that the risks of doing too much versus that of doing too little are now “symmetric”. The risk of doing too little now a “manageable risk”, he said, as more could always be done to bring inflation back to target, but doing too much could push the economy into recession, "causing a sharp deceleration of inflation, we would then have to rapidly reverse course.”

““Testing until it breaks” is not a sensible way to calibrate monetary policy,” the governor said.

The current level of rates would bring inflation down if maintained for long enough, although he warned of the dangers in easing policy too soon.