ECB will start cutting rates with 'victory' over inflation in sight

Bank of France governor Francois Villeroy de Galhau re-iterated that the inflation rate in France should fall to 2% next year.

The European Central Bank will probably start cutting rates during the spring, between April and June 21, as the "victory" against inflation is in sight, French central bank head and ECB policymaker Francois Villeroy de Galhau has said. 

"The consequences we, at the European Central Bank, should draw is probably to cut rates in the spring and I remind you that in France and Europe this is a season that lasts from April to June 21," he told France Info TV.

He also re-iterated that the inflation rate in France should fall to 2% next year. The Bank of France had trimmed its French economic growth forecasts for 2024 earlier this week, forecasting growth of 0.8% for this year, down from an estimate of 0.9% growth in December.

ECB president Christine Lagarde earlier this month hinted strongly that a long-awaited rate cut would be more likely to happen at the central bank's meeting in early June, rather than in April. 

Meanwhile, ECB Governing Council member Pierre Wunsch said the ECB will have to gamble soon with an interest rate cut even though wage inflation and price rises for services are uncomfortably high. 

"We are going to have to make a bet at some point," Mr Wunsch said on the Belgian national bank's annual report. Mr Wunsch said he had been pleading for the ECB to wait, but now felt it should act "before so long", without specifying a month.

He said the ECB was getting to a point where it could react to inflation heading in the right direction. 

"But it will remain a cautious move on the basis of what I know today because of the problem that has been commented again and again and again that service inflation and wage developments are still running at levels that are ultimately not compatible with our objective," he said. 

Eurozone inflation fell in February to 2.6%, but underlying price growth remained stubbornly high. 

Reuters