François Villeroy de Galhau: What monetary policy narrative after forward guidance?

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Columbia University, New York, 11 October 2022. 

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

Ladies and gentlemen, dear students and professors,

I am very grateful to Dr. Patricia Mosser for the invitation to speak at Columbia University. I already had the honour of delivering a speech here in April 2017, and it is great to be back. The current context is obviously quite different from five years ago: today we face too high inflation – compared with too low inflation in 2017 –, and we are navigating through a geopolitical environment that looks unprecedented in its uncertainty. Due to this uncertainty, binding forward guidance from Central Banks appears less relevant, and has rightly been put aside in the recent past. But this is not an argument for returning to the secrecy that characterised central banking until the 1990s. One of the most topical questions for central banks is therefore how to ensure a "new predictability". 

Indeed, not having forward guidance does not mean, cannot mean, not having a narrative and a monetary strategy. Let me elaborate on this today, first laying out the reasons why we have to act in a determined way to deliver our 2% inflation target (I), then proposing some milestones on our normalisation path (II) and finally shedding light on one sensitive coordination issue (III).