“Very likely” ECB rate cut next week

(Keystone-ATS) The governor of the Bank of France on Wednesday estimated that a further rate cut by the European Central Bank (ECB) was “very likely” next week. François Villeroy de Galhau added that she would “not be the last”.

“A drop is very likely” during the meeting of the monetary institution on October 17, after a first drop in June, and a second in September, “and it will not be the last,” indicated François Villeroy de Galhau on Franceinfo radio, adding that “the pace (of the decline, Editor’s note) will depend on the evolution of the fight against inflation.”

As for the extent of the drop, next week he recalled that the ECB was “used to acting with gradualism”, “without taking too big steps”, thus pointing towards a new drop of 25 points in basis (0.25 percentage points). “Victory against inflation is in sight,” he said, with currently “1.5% for the entire euro zone as for France”, in the harmonized European index.

“There may be ups and downs in the coming months”, but “we will be at 2% inflation sustainably in France at the start of next year, and in Europe during the course of next year” , according to the governor. However, he added that the ECB was watching “carefully” the evolution of oil prices, due to the high tensions between Israel and Iran, which has already caused prices to rise: if this increase “remains relatively limited and temporary, “this should not have too negative an effect on inflation and growth.”

Mr. Villeroy de Galhau noted that “real estate loan rates have started to fall again since the start of the year”, and therefore, French borrowing volumes since July have become “significant” again. He again called on individuals to “take advantage” of this situation.

Taking up the growth forecast figures published Tuesday by the Banque de France, between 0.4% and 0.5% in the third quarter before a setback at the end of the year, for an annual total of 1.1%, the governor judged the French economy “resilient, without being brilliant”.