François Villeroy de Galhau: Monetary policy in times of conflicts

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Society of Professional Economists (SPE) Annual Dinner, London, 20 November 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
21 November 2023
by François Villeroy de Galhau
PDF full text
(1,314kb)
  |  15 pages

Good evening.

It is a pleasure for me to be in London today, particularly at the invitation of the Society of Professional Economists. London evokes a lot of things for French people. French economists appreciate the concentration of excellent economic research in London – tonight's list of attendees is particularly impressive in this respect. But for French citizens, London also conjures up an important page in our history: we have not forgotten that during World War II London hosted the government in exile of the General de Gaulle and the Free French. It may be a surprise that I evoke this now, as central bankers typically speak about recent economic developments. But today I would like to consider a longer perspective, and focus on a key aspect of our current environment: conflicts.

In retrospect, the Great Moderation, which started soon after the Fall of the Berlin Wall, was a period of peace, rapid economic development and globalisation, stability, and relative political consensus. Economists were not the only ones to be lulled into thinking that this might be a permanent new steady-state, be it the "End of History"i or more modestly the end of economic crises and inflation. Although the situation had already deteriorated somewhat in the previous decade, in just a few years there has been a dramatic worsening due to worldwide tensions and fragmentation, and increasing political conflicts within our countries or groups of countries. What are the implications of this for central bankers? I will first try to describe the "almost indescribable": the nature of these shocks and their economic consequences, and then turn to how I think central banks should travel through this new and troubled landscape.