I was particularly proud that average inflation in France was 1.4% per year over five years from 1994 to 1999, fully in line with the definition of price stability. It had been an important contribution to the strategy of “competitive disinflation” that I had advocated for France and the economies participating in the Exchange Rate Mechanism (ERM I).
As I mentioned above, the cost of sterilizing the excessive short term capital inflows (almost ½% of GDP) may appear at first sight too high, but the benefit of stabilization, notably the resulting sustainable investment-led high rate of GDP growth of almost 4% since 1997, which is expected to continue well into this decade, far outweigh any temporary sacrifice the economy incurred in order to fulfill our stabilization goals.