PARIS (Reuters) – The European Central Bank (ECB) should keep its options open for a larger cut in key rates in December, François Villeroy de Galhau, governor of the Banque de France and member of the Frankfurt institution, said on Thursday .
Financial markets expect the central bank to cut borrowing costs by at least another quarter point at its next meeting on Dec. 12, and bets on a deeper cut have fluctuated in recent days .
“At this time, there is every reason to cut rates on December 12. Options should remain open on the size of the cut, based on upcoming data, economic projections and our assessment of risks “, declared François Villeroy de Galhau in a speech at the Banque de France.
He added that the ECB should also not rule out possible rate cuts at subsequent meetings.
After December, investors expect the ECB to cut rates at each of its next meetings until at least June 2025, which would bring the institution’s deposit rate, currently at 3.25%, to 1.75% by the end of 2025.
While inflation stabilizes sustainably close to the ECB’s 2% target and growth prospects remain gloomy, François Villeroy de Galhau declared that key rates should at least move towards a level where they neither restrict nor stimulate growth. He estimated this neutral rate in a range of 2%-2.5%.
“Should we go further (…)? I would not rule it out in the future, if growth remains moderate and inflation is likely to fall below the target,” he said .
(Written by Leigh Thomas; Claude Chendjou, edited by Jean-Stéphane Brosse)
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