ECB’s Villeroy: Confident Enough to Cut Interest Rates in June

19 April 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Thursday said the ECB was confident enough to cut interest rates in June.

In an interview with CNBC on the margins of the spring meetings of the International Monetary Fund and World Bank, Villeroy, who heads the Banque de France, said, ‘The question is the next Governing Council, which will be early June… and barring a major surprise, I think we should cut rates because we are now confident enough and increasingly confident about the disinflationary path in the euro area.’

The 2% inflation target was ‘in sight’, he said. ‘[W]e will achieve it by next year at the latest, and this is a strong sign of confidence.’

It was the moment to act in order to avoid getting behind the curve, he said, noting that that the ECB monetary policy would still be restrictive.

‘We still have ample room, while remaining in restrictive territory, to ease and to cut rates’, he said. ‘After this first rate cut, we will monitor inflation data… and we will adapt the pace of our next rate cuts, because there will be others, until final destination.’

The Governing Council should not necessarily limit interest rate cuts to meetings with new economic forecasts, but rather ‘it will be open', he said.

Real wages were projected to increase in the following months, he said, ‘because the deceleration of prices will be faster than the deceleration of wages’, which was good for consumption and would contribute to the European recovery.

Asked about the relation between monetary policy in the euro area and in the US, he said that the ECB was focused on domestic price stability.

‘We have no exchange rate target. So, we are data-dependent, we are not Fed-dependent’, he said. ‘Each of our monetary answers should be domestically driven.’