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ECB’s Villeroy Says Monetary Policy Must Remain Active

William Horobin
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ECB’s Villeroy Says Monetary Policy Must Remain Active

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Fiscal policy must help monetary policy support the global economy, European Central Bank governing council member Francois Villeroy de Galhau said in an interview with French daily Les Echos.

Expansionary monetary tools must remain “active” amid low inflation, but they are not sufficient, Villeroy told the newspaper.

“All available instruments need to be mobilized, including fiscal policy, as a complement to monetary policy,” Villeroy said, adding that it was fortunate the ECB moved to use tiering to mitigate the effect of negative rates. Tiering will reduce the cost of negative rates by 3 billion euros ($3.35 billion) for European banks and “several hundred million” for French banks.

Central banks must watch the risks in the financial system from expansionary measures, Villeroy added, noting that French authorities were vigilant about mortgage lending.

To contact the reporter on this story: William Horobin in Paris at whorobin@bloomberg.net

To contact the editors responsible for this story: Geraldine Amiel at gamiel@bloomberg.net, Christopher Elser, Sara Marley

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