FRANKFURT (Reuters) – It is “very likely” that the European Central Bank (ECB) will decide this month on a further cut in interest rates, François Villeroy de Galhau said in an interview with the Italian newspaper La Repubblica published Monday, while recalling that the institution kept “all options” on the table.
Asked whether a further reduction in borrowing costs should be expected at the next ECB meeting on October 17, François Villeroy de Galhau pointed out that the president of the institution, Christine Lagarde, opened the path to this hypothesis when she spoke last Monday before the European Parliament.
Recalling that the main data taken into account by the ECB was inflation, the governor of the Bank of France noted that inflationary pressures had eased more than expected in September.
“The balance of risks has shifted. Over the last two years, our main risk was exceeding our target of 2%” of inflation, he said in the interview. “Now we also need to pay attention to the opposite risk…from low growth and tight monetary policy for too long.”
François Villeroy de Galhau notes that “victory against inflation is in sight” but warns against any “complacency”.
“I firmly defended during our last Governing Council (in September) to maintain all options for October, and with good reason,” he declared, adding that he did not want to abandon a “pragmatic approach”, meeting by meeting. , as repeated this year by the ECB.
Asked about the possibility that the ECB would carry out a more aggressive rate cut, like the American Federal Reserve (Fed) which carried out a reduction of 50 basis points in September, François Villeroy de Galhau preferred to focus on the terminal rate, citing market forecasts – rates expected at 2% or lower by the end of 2025.
Furthermore, if it is to be “monitored closely”, the “very volatile” situation in the Middle East will “not necessarily” affect the monetary policy of the ECB, provided that the increase in oil prices is temporary and is not not seen in core inflation, he said.
(Written by Balazs Koranyi, Jean Terzian, edited by Kate Entringer)
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