ECB’s Villeroy: We Should Continue to Reduce Interest Rates

18 September 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Wednesday said that the ECB should cut interest rates further.

In an interview with French business news channel BFM TV, Villeroy, who heads the Banque de France, said, '[W]e have lowered them [the ECB short-term interest rates] twice and yes, we should continue to lower them.'

The good news about inflation was that even if the fight was not over yet, victory was 'in sight', he said.

Inflation in France was already around 2% and would remain at that level in 2025, when the ECB projected to achieve the overall 2% inflation target, he said.

The inflation outlook was currently more positive than the growth outlook, he said.

'The uncertainty that exists, that's why we are perhaps more cautious about growth - we are affirmative about inflation and more cautious about growth - it's a certain wait-and-see attitude on the part of the French people... and businesses', he said.

This cautious approach was a result of the many open questions regarding domestic politics and the international environment, he said.

'On growth there is resilience, we have avoided the recession', he said. 'There is a condition for the acceleration of the recovery, which we hope for, but it is certainly subject to uncertainty.'

In France, there was high debt and too-low growth, he said, adding that an answer to this problem would be to strengthen the French economy though businesses production capacity.

Still on the topic of deficit, he said that that France should return to the 3% limit not only to comply with the European fiscal rules, but also because it was the 'national interest'.

The timeframe for such adaptation, however, was not realistic, he said.

'Simply, we cannot do it in three years, by 2027. It is not realistic.', he said. 'Five years is doable.'