PARIS (Reuters) – France’s central bank governor rejected on Wednesday a think-tank’s proposal that the European Central Bank could make direct cash transfers to households to help meet its inflation target.
France’s Economic Analysis Council, an independent think-tank attached to the prime minister’s office, suggested in a report earlier on Wednesday that the ECB could conduct “helicopter money” payments as a last resort to boost inflation.
“Helicopter money, which has never been implemented and would be complex in practice, does not seem to us to be a good idea,” Bank of France Governor Francois Villeroy de Galhau told Senators in response to the proposal.
He said the proposal should not be taken up in a strategic review underway at the ECB because such transfers would leave a hole in the central bank’s balance sheet, requiring a “massive loss” to be recognised that could undermine trust in the central bank.
It would also blur the lines between monetary and budget policy since it is usually up to government and parliament to decide on transfers to households.
Lastly, it would be out of sync with a build-up in savings during the coronavirus crisis, Villeroy added.
The ECB has long undershot its target to keep inflation close to but just shy of 2%, although it has recently picked up in a development central bankers expect to be temporary.
The Economic Analysis Council said that a monetary transfer equal to 1% of gross domestic product could boost the inflation rate by half a percentage point over one year.
(Reporting by Leigh Thomas; Editing by Jon Boyle and Barbara Lewis)
