ECB’s Villeroy: First Interest Rate Cut Very Likely in Spring

8 March 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Friday said that interest rates were likely to be reduced in the spring.

In an interview with French business news channel BFM TV, Villeroy, who heads the Banque de France, said, ‘It seems very likely to me that there will be a first rate cut in the spring’, emphasising that ‘spring is a season that lasts from April until June 21.’

Recent numbers showed that the ‘disease [of inflation] has been cured’, he said.

‘We are now increasingly confident that we will bring inflation down to 2% by next year’, he said. ‘There is therefore a broad consensus on an upcoming rate cut.’

The latest Governing Council’s decision was ‘very convergent’ and there was consensus that the risks were balanced, he said.

‘We must guard against two pitfalls, that of haste, lowering rates too early and risking missing our inflation target of 2%, and there is the pitfall of remaining tense, that is to act too late and weigh too much on activity’, he warned.

When it came to the pace of easing, it would be better to act gradually, he said.

‘So there is a broad consensus that rates will be cut soon, or to put it another way, there is a broad consensus that gradualism is preferable to a "wait-and-see" policy, which would mean waiting too long’, he said. ‘I believe that gradualism is the best way to insure against these two risks, which are now symmetrical: haste, but also the risk posed by remaining tense.’