ECB’s Villeroy: Expectations of Two More Rate Cuts in 2024 ‘Rather Reasonable’

19 July 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Friday said that in light of the information available today, it was reasonable to consider that the ECB would do two more interest rate cuts this year, as long as data supported it. 

In an interview with French business news channel BFM, Villeroy, who heads the Banque de France, was asked about the market pricing of a rate cut in September and another in December, to which he answered that he would not make predictions, as any decisions would be data-dependent.

‘That being said, we remain free to make our decisions, but I would tend to say that seen from today, the markets' expectations on the trajectory of rates seem rather reasonable to me’, he added.

The ECB would look more closely at the inflation projections for 2025 and 2026 than at the 2024 fluctuations, he said.

Confirming the disinflationary trend was an important anchor in a context of uncertainty, he said, noting that the ECB was in a good place with inflation projected to reach the 2% target in 2025.

‘I think in a nutshell, what we saw yesterday is that disinflation is proceeding as expected’, he said. ‘We are in the last mile towards our 2% goal. Inflation will continue to fall a little more slowly, which was expected, but still surely.’

The ECB would continue to pay attention to services inflation, activity and growth, he said.

Asked about the impact of political uncertainty in France on the euro area, he said that the outcome would depend on the choices of the new National Assembly.

‘I believe that it is very important that France keeps control of its public debt and its public deficits. This is what will be the most monitored for the spread’, he said. ‘I believe that we should not at all oppose the French national interest and the European interest, it seems to me that the two converge, especially in the long term.’