According to ECB policymaker Francois Villeroy de Galhau, the bank is becoming more and more confident that it is winning the battle against inflation, which increases the likelihood of an interest rate cut in June. 

Unseen Situations

Despite the possibility that the Federal Reserve might not follow suit due to persistently high U.S. inflation, the European Central Bank (ECB) kept interest rates at a record high last week and hinted that it could begin reducing them as early as June.

“We ought to settle on a first rate cut at our June meeting, barring unforeseen circumstances. Indeed, our confidence in the disinflation path is strengthening,” Villeroy said to the French publication JDD.

“One useful tool for combating inflation has been the interest rate tool. Although we had to increase the rate to 4%, it is still lower than in the US, where it is 5.5% “, he continued.

Fall In Inflation

A growing number of ECB policymakers, including Villeroy, the governor of the French central bank, have backed rate decreases.

He warned last month that the European Central Bank (ECB) might have to reduce interest rates even further if inflation consistently fell short of the 2% target.

He said to JDD: “The June rate cut should be followed by more rate cuts by the end of the year; I call for a pragmatic and yet adequately nimble gradualism, based on economic data.”

“That being said, we will not go back to ultra low, even negative rates: the ones that we have seen during the 2015-2022 period were the exception.”