ECB Insight: Villeroy’s Dovish Bias Persists Beneath a Softer Tone

7 November 2025

By Marta Vilar – MADRID (Econostream) – Until recently among the European Central Bank Governing Council’s clearest voices in favor of further rate cuts, Banque de France Governor François Villeroy de Galhau has lately sounded unmistakably less eager to beat the drums for more easing.

With market participants increasingly wary of attaching too much weight to his pronouncements, it’s understandable that Villeroy would hesitate to put his credibility on the line by continuing to flag further easing that only seems ever more distant.

That said, we don’t think he has discarded the idea that, as he insisted in the weeks leading up to the Council’s October 30 meeting in Florence, Italy, a rate cut is “more plausible than a hike.”

The difference is just that he has since abandoned that line in favor of a more measured tone.

For example, on October 31 he issued a statement that said the ECB must “maintain full optionality” and that agile pragmatism was more essential “than ever.” That stands in clear contrast to the immediate aftermath of the Council’s September meeting, when he called another cut “entirely possible” and accused markets of having overreacted hawkishly to ECB President Christine Lagarde’s message.

One can reasonably suppose that his shift in tone is due partly to the brighter domestic outlook -- French GDP grew an unexpectedly strong 0.5% in Q3 – and indeed, he pointed in his statement to this “good news.”

On Wednesday, he again cited the upside GDP surprise, even as he cautioned that the “political situation deteriorated since September” and that the ECB’s “good position” did not mean a “comfortable” or “fixed” position.

For others who have used the same phrase, like Lagarde and especially some of the Council hawks, it can simply mean that rates are not permanently locked at 2% and could move next in either direction.

In Villeroy’s case, such language is meant to keep alive the idea that the easing may not be at an end. The old Villeroy’s hope – that another cut might yet transpire – is by no means gone, even if the new Villeroy’s willingness to push for one has bowed to an uncooperative reality.

We judge his attitude at the present juncture to be one of watchful patience and believe he remains no less ready to argue that risks are to the downside.

In essence, he has moved from pressing a case that has gotten tougher to simply keeping his preferred option open in the hope that the evidence arguing for another cut will eventually accumulate enough to bring around his currently skeptical peers.