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ECB likely to keep raising rates beyond 2% level, says French central bank chief
Home > Top Stories > ECB likely to keep raising rates beyond 2% level, says French central bank chief
Global Banking & Finance Review®
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By Daniel Leussink
TOKYO (Reuters) -The European Central Bank (ECB) will probably continue to raise interest rates beyond 2%, but “jumbo” rate hikes will not become a new habit, France’s central bank chief said in Tokyo, while also calling for international regulation of crypto assets.
The ECB has increased rates at its fastest pace on record, hiking them by a combined 200 basis points to 1.5% in just three months. Despite the rapid pace, markets still expect the bank to hike rates further to tame sharp, broad-based inflation.
“We are clearly approaching what I would call the ‘normalisation range’ which can be estimated at around 2%. We should reach this level by December,” French central bank governor, Francois Villeroy de Galhau, said in a speech at a financial conference in the Japanese capital on Tuesday.
“Beyond this level, we will probably continue to raise rates, but we may do so in a more flexible and possibly less rapid manner. Jumbo rate hikes will not become a new habit.”
Signs of peaking headline and core inflation in the United States were “good news” for everyone, he said, given that the world’s top economy had been at the forefront of the global inflation cycle.
Data released last week showed U.S. consumer prices rose less than expected in October, bringing the annual increase below 8% for the first time in eight months.
“U.S. monetary tightening has had strong spillovers on the rest of the world through the high level of the dollar,” the central banker said.
During a separate event at Tokyo’s Waseda University later in the day, Villeroy de Galhau indicated he hoped the collapse of crypto exchange FTX would be a “clear” accelerator for international regulation in the area.
“What happened in the last days is a reminder that we urgently need international regulation,” he said, noting that Group of 20 major economies previously reached agreement on the principles of regulation of stablecoins.
Villeroy de Galhau said stablecoins – cryptocurrencies with fixed exchange rate against a normal currency – bring innovation but also new risks of financial instability.
(Reporting by Daniel Leussink; Editing by Himani Sarkar, Kenneth Maxwell and Tom Hogue)
The European Central Bank (ECB) is the central bank for the euro and administers monetary policy within the Eurozone, aiming to maintain price stability and oversee the financial system.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They influence economic activity and inflation.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
Cryptocurrencies are digital or virtual currencies that use cryptography for security. They operate on decentralized networks based on blockchain technology.
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
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