ECB would be ‘wise’ to cut interest rates in September, says Villeroy

The European Central Bank (ECB) would be “wise” to cut interest rates again in September, French policymaker François Villeroy de Galhau said, warning that it risks missing its inflation target if it waits too long.

Inflation in the euro zone fell to its lowest level in three years in August, hitting 2.2% this month, according to preliminary data released on Friday.

“Unfortunately, our growth remains very weak. The balance of risks still needs to be monitored in Europe,” Villeroy told French magazine Le Point in an interview published on Friday, adding: “It would be right and sensible to decide in favor of a new interest rate cut.”

Villeroy, who is also president of the French central bank, said inflation would likely stabilize in line with the ECB’s 2% target in the first half of next year in France and in the second half of 2025 across the euro zone as a whole.

However, he added, if the ECB waits to reach its 2% inflation target before cutting interest rates, it will act too late and risk inflation falling below target.

Villeroy also said that financial markets’ expectations that ECB interest rates would fall to 2%-2.5% next year seemed “reasonable” to him.

Source: Terra

Rose

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