French Finance Minister Bruno Le Maire said policymakers must account for the fact that Europe is moving past the worst of an inflationary surge, signaling potential tensions to come as the European Central Bank’s rapid interest rate increases begin to hit the economy.
Speaking on the sidelines of an economic conference in Aix-en-Provence, the minister said price pressure should should ease by the autumn and France will be moving away from inflation in 2024. The country’s headline rate has slowed to 5.3% from a peak of 7.3% in February.
“It’s always very difficult in a time of very high prices and inflation, long-lasting inflation, to find the right balance between monetary policy and fiscal policy,” Le Maire said. “I don’t have any comment to make on monetary policy because the ECB is fully independent, but I think that considering the very last figures, we are going away from the wave of inflation and this should of course have consequences on the policies that are currently implemented.”
The French minister’s comments come after other government officials around Europe have offered less thinly veiled concerns over the ECB’s sharp tightening of monetary policy.
The central bank’s President Christine Lagarde, who also appeared at the conference in the south of France, said in an interview with local paper La Provence that the ECB still has “work to do” and won’t hesitate to act if needed. The Frankfurt-based institution has signaled it will likely increase borrowing costs again in its next decision on July 27.
Speaking on a panel at the conference earlier Saturday, Le Maire welcomed a debate among economists over whether the ECB should raise its inflation target in an effort to support investment required for the climate transition.
“Christine Lagarde mustn’t listen to me because I’m not allowed to talk about this,” Le Maire said. “But if economists open this debate, why not? No taboos, being transgressive, that’s how we will make progress.”
The finance minister spoke alongside Natixis SA economist Patrick Artus, who argued the ECB would need to raise its target to 3% in the coming years from 2% to ensure lower borrowing costs needed for investment.
Le Maire said France and Europe have already made progress by breaking rules of the past, including on state aid and investment in training and apprenticeships.
“We need to keep this transgressive and free mindset for our economy to succeed as well as it can,” Le Maire said.
(Update with added comments from finance minsiter, recasts throughout)
