ECB Governing Council member Francois Villeroy de Galhau said in a speech overnight that risks to inflation are now “balanced”, but risks to growth are “on the downside”. There, “the time has come to take out an insurance against this second risk by beginning rate cuts,” he emphasized.
Villeroy said whether it’s April or June for the first cut has “no existential importance”. After all, he reiterated that it should happen in Spring.
He also noted that ECB would probably start with a “moderate cut”. After that ” we won’t be obliged to reduce rates at every Governing Council, but we should keep that option.”
“We’ll probably start with a moderate cut,” he said. “After that, we won’t be obliged to reduce rates at every Governing Council, but we should keep that option.”
Regarding how far the ECB will ultimately go, Villeroy said it has a significant margin to lower rates before policy stops being restrictive or becomes too accommodative. “This is another reason to prefer agile gradualism to excessive wait-and-see,” he added.
