ECB’s Villeroy: Interest Rates Will Decline Gradually to Allow Adaptation

22 April 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Monday said that the ECB would probably start cutting interest rates in June and that easing would be gradual to facilitate adjustment.

In an interview with radio France Inter, Villeroy, who heads the Banque de France, was asked by how much the ECB would reduce its interest rates in June. ‘[I]t will be a gradual decline’, he answered.

‘Because that’s what allows you to adapt little by little. We are very pragmatic. I argue for pragmatic gradualism, meaning we will look at the data’, he added.

Gradualism didn’t necessary mean that the cuts would be small, he said, ‘it will be agile pragmatism so that we can continue afterwards.’

When deciding to reduce interest rates, which would likely happen in the next Governing Council meeting in June, the ECB would be setting an example for other central banks, he said.

‘Europe will be leading the way, because it is ahead of others, including the United States, in its progress against inflation. And there will undoubtedly be other cuts to follow. We'll see how this fight against inflation develops’, he said.

Changing the monetary policy stance would support activity, employment and investment in Europe, but fundamental reforms were still necessary, he said.

‘[W]e really need to push the single European market, including in new areas such as services and digital technology, which would also be quite favourable to France’, he said.