Aug 27 (Reuters) – The European Central Bank (ECB) is due to raise interest rates again significantly in September and should reach the “neutral” level before the end of the year, Francois Villeroy de Galhau said on Saturday. , Governor of the Bank of France.
The ECB raised interest rates in July for the first time in 11 years, raising its deposit rate by 50 basis points to zero, as inflation fears outweighed risks of a deterioration. of the situation.
Considered a centrist on the ECB Governing Council, Franois Villeroy de Galhau said that rates should continue to rise until the ECB reaches the neutral level, which is between 1% and 2%. At the neutral rate, the central bank neither stimulates nor slows down growth.
“We could be there before the end of the year, after another significant step in September,” he said at the Jackson Hole economic symposium organized by the US Federal Reserve.
As markets priced in a 50 basis point hike in September, several ECB officials called for a 75 basis point hike at the September meeting as well.
Franois Villeroy de Galhau said that the ECB was ready to go above the neutral level, if necessary.
“Have no doubt that the ECB would raise its rates beyond normalization if necessary: bringing inflation back to 2% is our responsibility; our will and ability to fulfill our mandate are unconditional”, he said. he adds.
Without explicitly acknowledging that the risk of recession was higher, he considered that the prospects for growth were receding while the prospects for inflation were deteriorating. (Report Balazs Koranyi, French version Jean-Michel Blot)