French CB chief: ECB rate cut likely in ‘spring’

PARIS: The European Central Bank will “very likely” cut interest rates in the spring, an ECB governing council member said Friday, fuelling market hopes that the move could take place by June. The comments by French central bank governor Francois Villeroy de Galhau came a day after the ECB decided to keep rates steady for a fourth straight meeting.

“It seems very likely to me that there will be a first rate cut in the spring,” Villeroy de Galhau told broadcaster BFM Business, adding that “in Europe like elsewhere, spring is a season that goes from April to June 21”. ECB president Christine Lagarde said Thursday that the Frankfurt-based institution was making “good progress” against inflation but “not sufficiently confident” about it.

She told reporters “more evidence” was needed that inflation was heading towards the bank’s two-percent target, but added that “we will know a lot more in June” — leaving the door open to a cut that month. Villeroy de Galhau told BFM Business there was a “broad consensus” among ECB governors “on an upcoming rate cut”.

He said the ECB was “more and more confident” that “we will bring inflation back to two percent by next year”. He warned against “rushing” to cut rates “too soon and risk missing our target” or “acting too late and weighing on (economic) activity”.

The ECB, US Federal Reserve and other central banks raised rates in efforts to combat inflation, which soared following Russia’s invasion of Ukraine in 2022.

Higher rates, however, also risk tipping economies into recession. The ECB predicted Thursday that the 20-nation eurozone’s economy would turn in weaker growth this year than previously thought after it narrowly dodged a technical recession in the second half of 2023.