The governor of the Bank of France, François Villeroy de Galhau, estimated on Friday “very likely” that the ECB will make its first interest rate cuts “in the spring”, the day after the decision of the European Central Bank to maintain its rate at a record level.
“It seems very likely to me that there will be a first rate cut in the spring”, indicated Mr. Villeroy de Galhau on BFM Business, specifying however “that in Europe as elsewhere, spring is a season which goes from April until June 21.”
On Thursday, the European Central Bank decided at the end of its Governing Council meeting to maintain its rate on deposits, which refers to its historic high of 4%, as it has since October.
Questioned at length by the press at the end of this meeting, the President of the ECB Christine Lagarde estimated that the governors were “not sufficiently confident” about the price dynamics” to begin a decline, even if “we are making good progress towards our inflation target.
In terms of timetable, the former French minister had, without explicitly saying so, opened the way to a possible rate reduction in June, declaring that the ECB will know “a little more in April”, and “a lot more in June” to feed its economic dashboard.
According to François Villeroy de Galhau, the discussion between governors was “very convergent”: “Today, around the table, (…) there is a broad consensus on an upcoming rate cut”, he said. he reported to BFM Business.
He believes that the ECB’s “effective” monetary policy has now made it possible to “cure the disease” of inflation, so that the ECB has “increasing confidence” in the fact “that we will bring inflation back to 2% by next year.
However, he warned against “two pitfalls”: that of “haste”, which would be to “lower rates too early and risk missing our target”, and that of “tension”, which would consist of “acting too much late and weigh on activity.
“Today, there is a broad consensus to prefer what I would call gradualism”, which is “the best way to insure against these two now symmetrical risks”, affirmed the governor of the Bank of France.