François Villeroy de Galhau: Monetary policy post-pandemic - balancing between science and art, predictability and reactivity

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the "Reassessing Constraints on the Economy and Policy" economic policy symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, 27 August 2022.

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

Ladies and Gentlemen,

This is the first time I have been able to attend the Jackson Hole symposium, but this renowned event epitomizes something I have always found of great value in the daily practice of central banking: the continuing conversation between policy makers and economic researchers. In this respect, the central banking world is a remarkable exception relative to most public policy making.

This unique culture brings with it the recurring debate of how much of monetary policy amounts to science or art. This is especially the case at the end of a very uncertain summer: for Europe at least, growth prospects for next year have receded, and inflation prospects increased, due to energy and gas price pressures and additionally to the evolution of the exchange rate. Today I would like to briefly look back at how useful science has been in the past (I). I will then offer suggestions on how to balance art and science in the current policy environment: in finding a "new predictability" despite the weakening of forward guidance (II), and in facing the unprecedented challenge of the positive remuneration of massive excess liquidity (III).