ECB must keep options open, says Villeroy


LUXEMBOURG (More Bank) – The European Central Bank (ECB) must keep its "open options" to normalize its monetary policy in a context of uncertainty and have an interest in keeping all the instruments at its disposal, François said Thursday. Villeroy de Galhau, Member of the Board of Governors of the Frankfurt Institution.

This normalization already initiated "must be progressive, and pragmatic," said the governor of the Banque de France in a speech delivered at a conference in Luxembourg.

"We must keep our options open to uncertainty: we are predictable, there is no need to be predetermined," he said.

The ECB ended its program of purchases of securities in the markets at the end of 2018 but pledged at its last monetary policy meeting in mid-December to keep its key rates unchanged until at least the summer 2019 to continue supporting the euro area economy as well as inflation.

It also left open the horizon of reinvestment of the proceeds of the maturing bonds, the gradual decrease of the reinvestments of the stock of securities to occur only after the end of "an extended period" after the first rate increase.

"In my opinion, we do not need to give new indications of calendar or quantum by next spring, where we will refine the sequence based on economic data," said François Villeroy de Galhau in a speech delivered at a conference in Luxembourg.

According to him, it is also not necessary to review the monetary policy tools of the ECB, which could lead to dismissing some of the instruments put in place after the financial crisis.

"We will not use any more (the instruments) once arrived at 'new normal', but we will have better keep them all available," said François Villeroy de Galhau.

"Clearly, our monetary policy will remain accommodative as long as necessary to reach our inflation target," he added.

Bank of Finland Governor Olli Rehn – one of the potential candidates to succeed ECB President Mario Draghi next autumn – pleaded in December for an inventory of monetary policy tools.

(Leigh Thomas, with Myriam Rivet for French service, edited by Véronique Tison)