ECB Should Clarify Inflation Goal Is Symmetrical, Villeroy Says

(Bloomberg) --

Bank of France Governor Francois Villeroy de Galhau welcomed a planned policy review at the European Central Bank and said its first priority should be clarifying the inflation goal.

ECB President Christine Lagarde, who took over this month, has said a strategic evaluation will begin in the near future. She has not given details, but prioritizing it has sparked jockeying among policy makers to set priorities.

“First, about the definition of our primary objective of price stability, we have to clarify in particular our various time horizons as well as our commitment to symmetry,” Villeroy said in a speech in Tokyo.

Other policy makers at the central bank including former president Mario Draghi have also spoken about taking a symmetric approach, suggesting the ECB would give equal weight to too-low and too-high rates in consumer-price growth. The central bank currently aims to keep inflation below, but close to, 2% over the medium term.

Villeroy also said the review should look into whether a separation between monetary and macroprudential policies should be lifted. After years of extending the ECB’s toolkit, “it may now sometimes make sense to approach monetary-policy decisions in order to deliver the monetary stance called for by our price stability objective while choosing the appropriate combination of instruments that minimize risks.”

The third prong of the overhaul, according to Villeroy, should be to look at how climate change can be incorporated into the ECB’s monetary-policy analysis.

To contact the reporters on this story: William Horobin in Paris at whorobin@bloomberg.net;Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jana Randow

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