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The election of Donald Trump as the next US president introduces risks and uncertainty for the global economy, according to Bank of France Governor Francois Villeroy de Galhau. His policies are expected to increase deficits and elevate long-term borrowing costs, prompting Europe to confront its economic vulnerabilities.
Francois Villeroy de Galhau, a member of the European Central Bank's Governing Council, emphasized that it is governments, not the ECB, that are shaping Europe's future. In a speech in London, he noted that policymakers must adapt to new economic realities, as supply shocks now affect inflation and the economy in multiple ways.
Falling interest rates in the eurozone are failing to stimulate the economy, which is showing signs of contraction, particularly in Germany and France. The Purchasing Managers' Index indicates a downturn, with concerns of a potential recession looming as demand weakens and uncertainty grows over the impact of the upcoming US elections.
The European Central Bank (ECB) risks undershooting its inflation target if growth remains sluggish, according to French central bank chief Francois Villeroy de Galhau. He emphasized the need for agility in monetary policy to avoid acting too late in unwinding past rate hikes, as markets anticipate further cuts in the coming meetings. Villeroy noted that if inflation stabilizes at 2% next year amid weak growth, there would be no justification for maintaining a restrictive monetary stance.
Francois Villeroy de Galhau, a member of the European Central Bank's Governing Council, emphasized the need for agility in interest-rate decisions to avoid lagging behind economic trends. He noted that while inflation remains a concern, the risk of falling below the 2% target is equally significant, particularly if growth continues to be weak. Current projections suggest inflation may reach this target by early 2025.
Francois Villeroy de Galhau
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