PARIS (Reuters) – Although it can be considered “excessive”, the recent sharp rise in long-term rates has the effect of tightening financial conditions and therefore argues against a further rate increase by the European Central Bank, said François Villeroy de Galhau, member of the ECB Governing Council.
The Frankfurt institute decided at its last meeting in September to raise its deposit rate to 4%, a record, after ten successive increases intended to bring inflation back towards its target of 2% by 2025.
In an interview with the German newspaper Handelsblatt published on Thursday, François Villeroy de Galhau declared that since then there had been “good inflation figures and, at the same time, a strong rise in long-term rates”, which could be judged “excessive but contributes to tightening the financing conditions of the European economy.
“So today, I think that there is no justification for an additional increase in ECB rates,” added the governor of the Bank of France.
François Villeroy de Galhau said rates should now remain as high as necessary, saying expectations of a rate cut, on both sides of the Atlantic, were traditionally too optimistic.
“There has been a lot of debate about the peak in rates: we must now talk more about a plateau, and we will stay for the necessary time on this plateau,” he said.
(Reporting by Leigh Thomas, written by Jean Terzian, edited by Bertrand Boucey)
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