FRANKFURT (Reuters) – Euro zone inflation will be back at the European Central Bank’s 2% target by the summer and interest rates could keep on falling to support the economy, French central bank chief Francois Villeroy de Galhau said just a day after the ECB’s fourth straight rate cut.
“The direction of the travel is clear: our monetary policy will go from restrictive towards neutral,” Villeroy told a meeting of think-tank OMFIF in London on Friday. “We should be sustainably around our 2% inflation target by this summer.”
Inflation is seen at 2.4% this month and could hover around this level for the next few months before easing again, ECB President Christine Lagarde said on Thursday.
Villeroy said the direction for rate moves was clear but governors would use “agile pragmatism” in deciding on the precise pace of cuts.
Markets expect the ECB to cut rates three more times this year, taking the deposit rate to 2% by the close of 2025. That would be in the middle of Lagarde’s estimate range for the neutral rate, which neither stimulates, nor slows economic growth.
(Reporting by Balazs Koranyi; Editing by Alex Richardson)
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