ECB’s Villeroy: Will Probably Cut Interest Rates This Year

9 February 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Friday said that positive developments in inflation increased the likelihood of an interest rate cut this year.

In an interview with French television news channel LCI, Villeroy, who heads the Banque de France, said that the ECB ‘will probably lower interest rates this year because we are making progress against inflation.’

‘Things are getting better... Inflation is falling, on average, we were at 7%, we are around 3[%], which is still too much. And we should be – we are going to be – towards 2% next year’, he said.

When the inflationary surge started, prices increased faster than wages, a phenomenon that was currently in the process of being reversed, he said.

‘On salaries today, on average, there is a little more than 4% increase, so above [the rate of increase of] prices, and this is the basis for our forecast of growth that will gradually accelerate in the coming months’, he said.

The increase of interest rates had been an effective remedy to combat inflation, he said.

‘We are emerging from the great emergency of overcoming inflation, and we are well on our way to overcoming the disease’, he said.

However, other issues such as unemployment and the green transition were less temporary, he said.