francois villeroy de galhau : some thoughts about monetary policy, the year to come, and the past ten years speech by mr francois villeroy de galhau, governor of the bank of france, at the 25th anniversary of the euro50 group event at the bank of france, paris, 28 november 2024. * * * ladies and gentlemen, it is my pleasure to be in such good company to celebrate the 25th anniversary of the euro 50 group. i would like to warmly thank edmond alphandery for being – supported by the late alexandre lamfalussy – the father, and still active chair, of this so pleasant child. euro 50 is as old – or rather as young – as the euro itself. let me start by expressing a great satisfaction, which may be the best present for this anniversary : the euro is a hugely popular success. 78 % of euro area citizens and 74 % of french citizens support our single currencyi – even more than the 68 % at the start. since its introduction in 1999, the euro has become the second most important currencyii in the international monetary system – and the ecb one of the most influential central banks in the world. yet, getting stronger throughout the challenging crises of the 21st century has not always been plain sailing, and won't be in the next future. today, i would like to focus briefly about where we are and where we could be heading in the near future ( i ), before coming back to the past ten years and what we learned on our unconventional toolkit ( ii ). i. where we are today, and where we could go in the year to come. in the euro area, inflation reached its peak at 10. 6 % in october 2022 and exceeded 4 % for two years. but it receded quickly, and stood at 2. 0 % in october 2024. beyond the likely ups and downs in the coming monthly data due to base effects, victory against inflation is in sight. the situation has however changed compared to the last months ; so has the balance of risks. as you know, the ecb has no dual mandate ; yet, our price stability primary objective is symmetric, around the 2 % target. in the euro area, inflation persistence is no longer the only risk. there is equally the opposite risk that inflation undershoots, especially if growth remains subpar. according to the latest actual inflation data, the euro area could be sustainably at 2 % inflation already early 202

our monetary policy. should we go further, below r *? i wouldn't exclude it in the future, if growth were to remain subdued and inflation at risk of falling below target. but as a pragmatist, let me stress that these two questions are not urgent : the first part of the journey till the " confidence zone " of r * is clear and still significant ; we will then have time and additional data to adjust for the second part. and this brings me to the pace of this first part. which pace to remove the restrictive bias? the name of the game here is and remains full optionality, combining the two dimensions of pace which are the frequency of rate cuts and their size. we'll discuss in each of our next meetings, and look at data – be they actual or forecasts. that said, let me give two indications : seen from today, there is every reason to cut on december 12th. optionality should remain open on the size of the cut, depending on incoming data, economic projections and our risk assessment. optionality also means that, for the following meetings, we shouldn't exclude any of them for possible cuts. stating so the obvious, i don't mean to precommit to cut " back to back " in each of these meetings : this would be a renewed and excessive 2 / 5 bis - central bankers'speeches forward guidance. we should stick, as we did in october, to what i call an " agile pragmatism ", data driven but not timid. ii. some thoughts about our unconventional toolkit looking back now to the last 10 years, let me turn to some personal reflections on the two broad sets of " non - conventional " instruments. it will be a focus of our next strategy review. by the way, we should avoid the possible trap of the " immediate weather forecast ". in the previous 2021 review, we were just exiting the period of lowflation and even the risk of covid deflation, and we were unconditionally positive about our nonconventional toolsvi : " [ the ] assessment [ conducted as part of the strategic review ] found that each of the instruments ( including negative interest rates, forward guidance, asset purchases and longer - term refinancing operations ) has been effective in raising output, employment and inflation, and that the different instruments have reinforced each other. " let us be careful not to make a symmetrical one - sided assessment today :