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Business News/ News / World/  ECB rate cut likely in June, French central bank chief says 'victory on inflation really within sight'
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ECB rate cut likely in June, French central bank chief says 'victory on inflation really within sight'

The European Central Bank will lower borrowing costs in the spring, with June more likely than April for a first move, Bank of France Governor Francois Villeroy de Galhau said

'It’s perhaps more probable in June — we are very pragmatic and will see depending on the data.' French central bank chief Francois Villeroy de Galhau said (Photo: Bloomberg)Premium
'It’s perhaps more probable in June — we are very pragmatic and will see depending on the data.' French central bank chief Francois Villeroy de Galhau said (Photo: Bloomberg)

The European Central Bank will lower borrowing costs in the spring, with June more likely than April for a first move, Bank of France Governor Francois Villeroy de Galhau said.

“We will probably cut rates in spring, and spring in Europe is from April to June 21," Villeroy said on France Info radio. “It’s perhaps more probable in June — we are very pragmatic and will see depending on the data."

The ECB has policy decisions scheduled for April 11 and June 6, with the vast majority of Villeroy’s colleagues indicating the latter meeting will likely see the deposit rate start to be lowered from its current record of 4%.

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In a separate blog post on Wednesday, his Latvian colleague — Martins Kazaks — said that if the euro-area economy “roughly follows" the ECB’s forecasts, “then the decision to start reducing interest rates could be made within the next few meetings."

Their Belgian counterpart Pierre Wunsch was less specific, just acknowledging that policymakers will eventually have to lower rates without being completely sure that inflation is returning to the 2% target.

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Villeroy’s comments came as the Bank of France lowered its 2024 projection for underlying price gains — a measure that excludes food and energy — to 2.4% from 2.8% in December.

“On inflation, victory is really within sight," Villeroy said.

Kazaks also sounded optimistic, saying that “the dragon of inflation is pinned to the ground, a little more and it will be defeated."

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Signs of economic weakness could add to the case for a rate cut. The ECB already lowered its growth forecast for 2024 last week, with President Christine Lagarde saying that the outlook for now is “subdued." 

Data on Wednesday showed that euro-area industrial production slumped at the start of the year, weighing on expansion in the first quarter. 

 

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Published: 13 Mar 2024, 06:40 PM IST
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