02 Mar 2023
Inflation in France will potentially hit a peak in the first half of this year, and a recession risk could be ruled out, according to French European Central Bank (ECB) policymaker and Bank of France governor Francois Villeroy de Galhau on Wednesday.
The central bank governor said inflation should revert back to around 2%, the target set by the European Central Bank, by the end of next year to the end of 2025.
In a bid to drive red-hot inflation back towards the 2% goal, the ECB has increased rates by 300 basis points to 2.5% since July last year and pledged to announce an additional 50 basis-point rise this month, Reuters news agency reports.
"After the "sprint" of monetary normalisation that began in July 2022, we are now entering a new phase of monetary policy that is more comparable to a long-distance race," the central bank governor told a hearing of the French parliament's finance committee.
"It will be longer - we must not claim victory too quickly - but more gradual and more pragmatic in the pace of the next hikes," Villeroy went on to say.
Although it is too soon to determine when interest rates may hit a peak, the governor said it would be "desirable" by summer, September at the latest.
The central bank will marginally increase its growth forecast for France's economy for this year on 20th March, from a 0.3% forecast rise in December, before a recovery in 2024.
In addition, the country's public debt ratio is 20 percentage points more than the euro area as a whole, the Reuters report adds, totalling 113% of GDP against 93% in Q3 last year. Yet, unlike other major nations in the euro area, it is not declining.