ECB Will Probably Cut Rates This Year, Villeroy Says

The European Central Bank will likely lower interest rates in 2024 as the pace of price increases eases toward 2% by next year, Bank of France Governor Francois Villeroy de Galhau said.

“We will probably cut rates this year because we are making progress against inflation,” the policymaker said Friday on LCI television. “We are exiting the emergency of fighting inflation and are on the right path to overcome the sickness.”

Markets are betting on an initial reduction in April, though most policymakers appear to be favoring June. Villeroy has previously said no date is excluded and everything is possible at forthcoming meetings — depending on data.

Speaking earlier Friday, his Latvian counterpart, Martins Kazaks, said investor hopes for monetary easing at one of the next two gatherings may be too aggressive.

“At the moment, there are expectations that the rates could be cut in the spring, in March or April — I wouldn’t be optimistic,” Kazaks told Latvijas Radio. “I would be cautious and I would wait until the inflation story is over. Then we can safely breathe and those rates can be lowered step by step.”

Villeroy also said French economic growth will “accelerate gradually” in the coming months as inflation falls below the average rate of wage increases. The Bank of France expects a recession to be avoided, with expansion of about 0.9% this year.

— With assistance from Aaron Eglitis

Source: Bloomberg

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