ECB Governing Council member Francois Villeroy de Galhau, in an interview with the German newspaper Handelsblatt published yesterday, weighed in on the current debate surrounding ECB’s interest rates. Stating his view clearly, Villeroy remarked, “Today, I think there’s no justification for an additional increase in the ECB rates.”
Rather than focusing on the peak in rates, Villeroy believes the dialogue should shift towards the concept of a rate “plateau.” In his words, “we’ll remain on this plateau as long as necessary.”
Villeroy also provided reassurance regarding the economic outlook of the eurozone. Contrary to the hard landing fears that loomed last winter, he noted, “We are not facing the worst-case scenario.” Elaborating further, he added, “I believe our monetary policy can and should now aim for a soft landing for the euro zone: We’ll exit inflation, and we’ll probably do so without a recession.”
Commenting on the broader market sentiments, Villeroy observed that expectations, both in Europe and US, have historically been “a little too optimistic regarding a future rate cut.”
