ecb – cepr – banque de france conference – paris, 25 september 2023 monetary policy in the euro area : was it too late? or could it now be too much? speech by francois villeroy de galhau, governor of the banque de france press contact : mark deen ( mark. deen @ banque - france. fr ), deborah guedj ( deborah. guedj @ banquefrance. fr ) page 1 sur 13 ladies and gentlemen, it is my great pleasure to welcome you to the'monetary policy challenges for european macroeconomies'conference. as you know the conference is jointly organised with the european central bank, cepr and the journal of monetary economics. the programme features some of the most distinguished economists in the field of monetary economics, and i would like to welcome in particular my colleague philip lane, the chief economist of the ecb, who will give a speech tomorrow, and our two keynote speakers, helene rey and jordi gali. central bankers are always eager to learn from academics : we need high quality research to provide good policy. the conference aims to present recent studies with a focus on european questions. it is a welcome initiative as an overwhelming majority of applied macroeconomic research focuses on the us. this is for understandable reasons, given the size of the us economy, but i daresay that european questions are really worth exploring further. first, the euro area is the world ’ s third largest economy. second, and most importantly, the euro area constitutes a unique endeavour, in which 20 countries have freely and peacefully decided to unite their efforts and create a joint currency. this currency union will celebrate its 25th anniversary next january. it has resisted severe stress tests – most recently covid and war – and has garnered ever increasing popular support : today 78 % of citizens in the euro area support our single currency, up from 68 % in 1999. despite its remarkable success, the largest currency union in the world gives rise to specific economic challenges. in the remainder of my talk i will elaborate on the current situation in the euro area, looking back at the inflationary episode that started in 2021. to set the scene i would like to discuss two criticisms that have been directed at our monetary policy ( and other central banks ’ ) : ( i ) we allegedly reacted too late when inflation started to rise ; ( ii ) we could run the risk of doing too much today. page 2 sur 13 1. “ too late

##s. in october 2008 the samos system settled a record aggregate value of r8, 5 trillion. the bank continued its role as part of the cls system oversight group chaired by the federal reserve bank of new york. during the year the bank and other participating central banks signed a cls oversight protocol arrangement. cls oversight arrangements and processes were thoroughly and successfully tested during the financial market crisis in september and october 2008. financial stability financial stability is of vital interest to central banks and, with the evolution of the global financial crisis, renewed attention has been paid to financial stability policy responses. some central banks have responded by adopting more explicit and broader mandates for financial stability. the crisis also highlighted the need for macroprudential analysis of the financial system as a whole in order to identify and mitigate systemic risks. the bank continually seeks to identify inherent weaknesses in the financial system and monitors risks that may result in financial system disturbances. financial institutions and markets in south africa were spared the worst of the direct effects of the global financial crisis as they were largely shielded by their limited exposure to risky foreign assets and liabilities. developments in the domestic financial infrastructure and regulatory environment that are likely to strengthen the resilience of the financial system include new legislative developments to improve competition, consumer protection and corporate governance. bank regulation and supervision as part of its bank supervision function, the bank maintained its focus on promoting the soundness of the domestic banking system through the effective and efficient application of international regulatory and supervisory standards. the implementation of basel ii on 1 january 2008 and the application of the core principles for effective banking supervision issued by the basel committee on banking supervision remain the cornerstones of the bank ’ s regulatory and supervisory framework. the bank continued to refine its basel ii - revised regulatory and supervisory approach during 2008 and 2009 by attending, inter alia, to the internal capital adequacy assessment processes implemented by banks ; thematic reviews of credit, market and operational risk ; and the processing of applications by banks to use the advanced approaches to calculate their minimum capital requirements in respect of credit and operational risk. in line with international developments, the bank held discussions with the banking industry on the stress - testing frameworks it implemented. in addition, the bank continued to develop its own internal stresstesting expertise and methodology to facilitate the effective monitoring of the stress - testing frameworks of banks. the secondary effects of the international financial market turmoil, combined with cyclical economic developments in south africa, worsened the operating environment of the banking