“From now on, wages will increase faster than prices,” assures the governor of the Bank of France

“It is not only a forecast but a commitment: we will bring inflation down to 2% by 2025 at the latest.” Invited to comment on the latest forecasts from the Banque de France this Tuesday, the governor of the institution François Villeroy de Galhau wanted to be optimistic for the years to come. “We see a sharp slowdown in 2023, but then growth increases in 2024 to 0.9%, then to 1.3% in 2025, to reach 1.6% in 2026, and this, because we will have left the “inflation”, he assured at the microphone of France Inter. According to the governor, the French should soon feel the effects of this improvement on their purchasing power. “This is good news: from now on, prices will increase less quickly than wages,” he insisted.

The institution therefore plans for prices to catch up with wages, thanks to the decline in inflation. “From now on, wages will increase faster than prices, because the drop in prices is very significant,” repeats François Villeroy de Galhau. As an illustration, the governor recalled the improvements observed in recent months. “We were at 7% inflation at the start of the year, which was far too much, particularly for food and energy, and we went down to 3.5% on average at the end of the year. We will reach 2.5% by next year, and 2% at the latest by 2025,” he said. A speech more or less similar to that given, at the end of November on the same channel, by the Minister of the Economy Bruno Le Maire. “We are emerging from the most serious inflationary crisis since the 1970s [...] The results are there, undoubtedly not on all products, but overall, inflation, today, is defeated, and that is a real economic success,” welcomed the boss of Bercy.

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The governor of the Bank of France, however, wants to be cautious. “The French economy has fairly solid engines, but it is a gradual recovery and we obviously should not declare victory,” he tempered. It is also by virtue of this prudence that François Villeroy de Galhau speaks of the “stabilization” of interest rates and not their immediate decline. “All major countries have raised their key rates to fight inflation and it is effective everywhere; since October we are no longer going to mount them, which is already an important step,” he said. The decline, long awaited by economic players, “should take place at some point in 2024,” he added. “Lowering rates too early exposes the economy to the risk of a relapse into this disease that is inflation,” warned the governor.