ECB Should Consider Cutting Rates in September, Villeroy States – Reuters

PARIS (Reuters) – Francois Villeroy de Galhau, a French policymaker and governor of the French central bank, suggested that the European Central Bank (ECB) should consider implementing another interest rate cut in September. He cautioned that delaying such a decision could lead to a failure to meet its inflation target.

Recent preliminary figures revealed that inflation in the eurozone decreased to its lowest level in three years in August, registering at 2.2%.

Villeroy emphasized the ongoing challenges in economic growth, saying, "Unfortunately, our growth remains too weak. The balance of risks still needs to be monitored in Europe." He described a new rate cut as both "fair and wise."

He further indicated that he expects inflation to align with the ECB’s 2% target by the first half of next year in France, and in the broader eurozone by the latter half of 2025.

He also pointed out that if the ECB waits until inflation reaches the 2% target before reducing interest rates, it risks acting too late, which could lead to missing that target altogether.

Lastly, Villeroy deemed current market expectations that ECB rates could drop to between 2% and 2.5% next year as "reasonable."