ECB’s Villeroy: ‘Barring Surprises, No More Rate Hikes’

15 December 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Friday said that the ECB was unlikely to increase interest rates again absent any new shocks.

In an interview with French economic webcast Boursorama, Villeroy, who heads the Banque de France, said, ‘I believe that we can say that barring shocks, barring surprises, no more rate hikes. Yes, but that doesn't mean a very rapid drop in rates.’

Interest rate cuts were not discussed by the Governing Council at Thursday's monetary policy meeting, he said. ‘We didn't talk about the rate cut yesterday, no one proposed it.’

‘I believe that we are on a plateau where we must give ourselves time to appreciate the view, that is to say, to appreciate the effects of monetary policy’, he said.

As President Christine Lagarde during the press conference following the Governing Council meeting, he emphasised that decisions were data-, not calendar-driven.

‘Let's be clear: as long as there's no more hiking, after a plateau on which I insist once again, the next move should, barring any surprises, be a decrease’, he said. ‘But we're not guided by a calendar, we're guided by the data.’

The relation between reducing reinvestments under the Pandemic Emergency Programme (PEPP) and reducing interest rates was not to be made, Villeroy said.

‘I would like to make it very clear that there is total, absolute separation between the date that we announced on the PEPP [reinvestments to be reduced] and the possible date of a rate cut’, he said.

Both confidence and patience were necessary to restore price stability, he said, and made it clear that he did ‘not believe in this specificity of the last kilometre’ of the disinflationary process.

‘I believe that we should not declare victory too early, but I believe that in this fight against inflation, we are scoring points and that the French, the entrepreneurs, can be confident in the fact that we are bringing inflation back towards 2% by 2025’, he said.