ECB shouldn’t dismiss second rate cut in July – Villeroy

By Aya El Sayed On May 27, 2024

Governing Council member Francois Villeroy de Galhau said. Credit: AFP

The European Central Bank shouldn’t rule out consecutive rate cuts in June and July, said Governing Council member François Villeroy de Galhau on Monday, as reported by Bloomberg.

Villeroy advocates for maintaining flexibility in monetary policy, emphasising the importance of data-driven decisions, and avoiding commitments to specific timing for rate adjustments.

Market caution is evident, with reduced expectations for monetary easing and only two quarter-point reductions fully priced in 2024. Villeroy highlights the ECB’s capacity for further loosening, with market expectations aligning with a terminal rate of about 2.8 per cent in five years’ time.

Chief Economist Philip Lane reaffirms the ECB’s data-driven approach to rate decisions. Villeroy downplays the influence of US policy on ECB decisions, expressing confidence in managing potential impacts on inflation and financial conditions.