ECB’s Villeroy: Jun rate cut, then by gradualistic easing this year

ECB Governing Council member Francois Villeroy de Galhau indicated an interest rate cut is on the table at the next meeting in June. Onward, there would be more policy loosening this year with a “gradualism” approach.

“Bar a surprise, we should decide on the first cut at our next meeting on June 6. We are indeed growing more and more confident in the disinflation path,” Villeroy said in an interview with Le Journal du Dimanche.

“The interest rate tool has been an effective weapon against inflation. We had to lift that rate to 4% but it is less than in the United States, where it stands at 5.5%,” he added.

Further elaborating on the future direction of ECB policy, Villeroy emphasized a cautious but flexible approach to further rate reductions: “The June rate cut should be followed by more rate cuts by the end of the year; I call for a pragmatic and yet adequately nimble gradualism, based on economic data.”

Moreover, Villeroy made it clear that while ECB is moving away from the high-interest rate environment of recent years, it does not intend to revert to the ultra-low or negative rates that characterized the period from 2015 to 2022.