ECB’s Villeroy Appeals Again for ‘Pragmatic Gradualism’, Defends Timing of First Cut

11 June 2024

By David Barwick – VIENNA (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Tuesday reiterated his preference for future rate cuts to be subject to ‘pragmatic gradualism’, whilst defending the timing of last week’s 25bp rate cut as appropriate.

In remarks delivered virtually at a conference of the Austrian National Bank, Villeroy, who heads the Banque de France, said, ‘We are certainly not relaxing our resolve.’

‘As regard future decisions, we are not pre-committing to a particular rate path’, he said. ‘We will remain data-dependent, and I plead for what I call “pragmatic gradualism”.’

Referring to the Council’s decision to cut rates last Thursday, Villeroy said that ‘as we are confident enough about reaching our 2% target, the time had come for a first rate cut of 25bp and a somewhat less restrictive monetary policy.’

The reduction of the deposit facility rate from 4% to 3.75% was still restrictive, he said. ‘With 3.75% we are still actively fighting inflation’, he said.

A soft landing had not yet been achieved, but was ‘in sight’, he said.