Speech

Managing Director’s Opening Remarks: 2022 Michel Camdessus Central Banking Lecture

September 14, 2022

1. Introduction

Mesdames et Messieurs: Bonjour. Ladies and Gentlemen, it is my great privilege to welcome you today to the ninth Michel Camdessus Lecture—our signature lecture series on the role of central banks.

I want to recognize that we have with us family of Michel Camdessus—his granddaughter, Camille—joining us today. We also have with us two former First Deputy Managing Directors of the IMF—Anne Kruger and John Lipsky—who make us very proud. And of course, many friends of the Fund, many senior leaders at the Fund, and to our staff, who have been working so hard over the past years to serve our membership.

So, it is my privilege to introduce our speaker: the Governor of the Banque de France, François Villeroy de Galhau.

I could not be happier, François, that you are here with us—and for the first time since the pandemic, we can be together and hold the Camdessus Lecture in person.

And there are two reasons why I am so thrilled that you are with us today: first, in you, we have someone with remarkable policy integrity and vision, and we need that in the complex times we face. The second reason is that you and I have been having many meetings of heart and mind, not least because of the shock that climate change imposes on humanity and its future.

2. Global Outlook

So where are we today? Like many of you, I opened the news today, and the news was higher-than-forecast inflation reading for August and the markets sharply down. This is just one snippet of the uncertainty and difficulties we face.

In a short three years, we have experienced a shock, upon a shock, upon a shock. First the pandemic; then Russia’s invasion of Ukraine—both contributing to a surge in prices, to stubborn inflation that is translating into a cost-of-living crisis.

Last October, when we held our IMF Annual Meetings, many of us were quite upbeat: global growth was relatively strong—we ended the year with 6.1 percent growth. And vaccines gave us the confidence to expect that the pandemic was over.

So, we thought that the inflation we were experiencing would subside—and we were proven wrong. Wrong when Omicron hit the world. Wrong when Russia invaded Ukraine. Wrong during this summer, when climate shocks affected dramatically agricultural productivity in many places, and we are likely to suffer that further in the future.

So, inflation is stubborn and more broad-based than we thought it would be. And what it means is that we need central bankers like you, François, to be as stubborn in fighting it as inflation has demonstrably been.

We are mindful that you are on the frontline. And all of us in this audience are with you. And of course, we at the IMF work relentlessly to provide the analytics that can help us steer through this time of uncertainty.

3. Policy Actions

There are remarkable differences between where we were in 2020 and where we are today. Back then, once we diagnosed the pandemic as a major supply-side shock, with demand-side implications, it was straightforward: monetary policy accommodation combined with fiscal policy accommodation.

Today, monetary policy has to tighten up, whereas fiscal policy still bears the burden of supporting the most vulnerable. If it does this well and of course central banks do their job well, we may get through next year with less pain. But if fiscal policy is not sufficiently targeted, then it may become the enemy of monetary policy, fueling inflation and making the job of central banks tougher.

And then, we have the issue of debt: more than 25 percent of emerging market economies have either defaulted or had bonds trading at distressed levels, including countries that we did not expect to see in this category; and over 60 percent of low-income-countries are in, or at high risk of, debt distress.

This means, first and foremost, that large creditors such as China and private-sector creditors have a responsibility to act—to reduce the risk of debt crises. But debt is also an issue for advanced economies, and it is very relevant for the credibility of monetary and fiscal policies.

4. Personal credibility and experience

From history we have learned that it is credibility and public trust that matter. That is why you, François, as an example of integrity and backbone—you never mince your words—you are the right person to talk to us today! And you have chosen a great theme. I am so very keen to hear.

Let me add three more points about François: first, being from the Alsace region, François is a true European who speaks French, English, and German—and, of course, we know that French is the ‘music of languages’. He also enjoys spending time in his home region, and he might tell us more about that later.

Second, I learned that his favorite book is Stefan Zweig’s autobiography: “The World of Yesterday: Memories of a European,” It vividly portrays an incredibly tough time in Europe, including inflation running out of control in the early 1920s.

My third point is that in François we have someone who is so well-rounded. You spent 12 years in the private sector; many years in the French Ministry of Finance; and since 2015, you have served as the central banker of France, Governor of the Banque de France. In this capacity, you are a member of the Governing Council of the European Central Bank. But most importantly, you are now chair of the Bank for International Settlements, which means that you are the ‘central banker of the central bankers’.

We also admire what you have done with macroprudential policy in France: building buffers ahead of the pandemic, which helped to support the economy through the COVID-induced shock. We admire your leadership on the Network for Greening the Financial System.

And above all, we are pleased that you are bringing with you some Michel Camdessus. You and Michel are close friends, and I learned that he participated in the thinking behind your lecture. So, we actually get two lecturers today.

Thank you, François, and Bienvenue!