François Villeroy de Galhau: Household expectations

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Joint Deutsche Bundesbank-Bank of France Conference on Household Expectations, Frankfurt am Main, 26 September 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and Gentlemen,

It is a great pleasure for me to open - with my colleague Jens Weidmann - this joint Bundesbank - Banque de France conference on households' expectations. I would like to thank warmly the Bundesbank:  this French-German cooperation testifies that our two institutions can promote and contribute to good research on a very topical policy issue. Over the past year, the decline of market inflation expectations has been pronounced while households' expectations have been increasing quite steadily. This divergence is a challenge for our assessment on inflation expectations. All the interesting papers presented in the next couple of days will illustrate how much we can learn on inflation expectations when observing them outside financial markets.

I. Inflation expectations: a key issue for monetary policy

I.1. Policy relevance for Central Banks

Stable inflation expectations at a level close to our target are - of course - key for our monetary policy: they provide a strong nominal anchor helping us to stabilize inflation when facing large demand or supply shocks. Since the 1990s, management of inflation expectations through central bank communication has become a standard tool for monetary policy.