François Villeroy de Galhau: Inflation and monetary policy in a post-Covid-19 world

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Nordic Summit 2021, 25 May 2021.

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

Ladies and Gentlemen,

I am delighted to be with you today. Denmark and the Nordics are among the most successful countries in Europe, and even worldwide: a unique mix of economic innovation, social cohesion, and environmental commitment. But today, in the country which is with its currency at the closest frontier of the euro area, you invite me to speak about "Inflation and monetary policy in a post-Covid-19 world".

As of 2006, Olivier Blanchard said : "Monetary policy can pretend to be close to science if it can be conducted using simple and robust rules [-] Monetary policy must be closer to art if it is frequently confronted to new, poorly anticipated and poorly understood, contingencies." The current debate on monetary policy is a perfect illustration. While a few years and even a year ago everybody feared the disappearance of inflation, the world is now worried by its comeback. While a few months ago the emergency support in the face of the Covid crisis was the No.1 concern, we are now talking about exit and post-Covid world. This is precisely the title of the speech you invited me to give.

Faced with such swings in sentiment, I want even more to stress today two ideas that are constant and consistent:

(A) the ECB has been an innovative and efficient inflation-targeter, including in the Covid-crisis; 

(B) beyond Covid, the ECB has  a powerful "quartet of tools" to keep its monetary policy as accommodative, and for as long as necessary. 

A. The ECB as an innovative and efficient inflation targeter

In the first part of my remarks, let me try to answer three questions: is the ECB clear in its objective? is it consistent in its instruments? and is it efficient in its results?

I. Is the ECB clear in its objective?

For the ECB, like all other major central banks, our inflation objective is our lodestar.