Bank of France chief: still some room for policy maneuver: Handelsblatt

Former BNP Paribas banker Francois Villeroy de Galhau arrives for a hearing by finance committees at the National Assembly in Paris
Francois Villeroy de Galhau poses as he arrives for a hearing by finance committees at the National Assembly in Paris, France, September 29, 2015. REUTERS/Jacky Naegelen

November 8, 2015

FRANKFURT (Reuters) – Weaker growth and inflation that’s too low are threats to the euro zone, but monetary stimulus is showing its first signs of success and there is still some room for policy maneuver, Bank of France Governor François Villeroy de Galhau said on Sunday.

Speaking to the German newspaper Handelsblatt, Villeroy de Galhau said the effectiveness of monetary policy must be measured over the medium term, not the short term. He declined to say whether the European Central Bank should ease policy further in December.

The ECB last month raised the prospect of providing more monetary stimulus to combat low inflation and weak growth, and said it would decide by its Dec 3 meeting whether revised quarterly forecasts make action necessary.

It said extending or modifying its program of buying 60 billion euros of assets a month or cutting the deposit rate deeper into negative territory are among the options it would consider.

Villeroy de Galhau, who took over leading the Bank of France this month and will attend his first ECB Governing Council meeting in December, also called on France to push ahead with structural reforms to make its labor market more efficient.

He also suggested Germany and France should work together to improve governance in the euro area because maintaining the European status quo is not an option.

Calling on France to meet EU budget rules, he said Paris needed to ensure that its deficit is under 3 percent of GDP by 2017.

(Reporting by Balazs Koranyi, editing by Larry King)