EU, de Galhau: “A rate cut is likely in October”

Growth in Europe is slowing, some countries are in recession. We can expect a rate cut from October: “Yes, it is very probable,” explains the governor of the French Central Bank to “Repubblica”. François Villeroy de Galhau – the president Christine Lagarde he mentioned it last Monday in the European Parliament. But our compass in terms of monetary policy and rate cuts is above all inflation, which once again surprised us on the decline and fell below 2% in September: to 1.8%. Of course, core inflation is still at 2.7 percent and that of services is more stubborn, at 4. But core inflation is also expected to gradually decline to approach 2 percent next year. The markets even expect lower values: for 2025, they predict inflation below 1.8 percent. This – adds the governor – means that the balance of risks is changing. Over the past two years, the risk we have run is that we will exceed our 2 percent target. We must now be wary of the opposite risk, so as not to miss our objective in the face of weak growth and a monetary policy that has been restrictive for too long.”

According to de Galhau, “victory against inflation is in sight, but we must not become complacent and relax at this time. I fought hard at the last board meeting to keep all options open in October, and I did well. I will not change my point of view and I will not abandon my pragmatic approach, based on decisions taken council after council – which for me has never meant quarter after quarter.” As for the price of oil and the Middle Orient: “We need to carefully monitor this very volatile situation. But as long as it is temporary and does not dent underlying inflation, a rise in oil prices should not necessarily change our monetary policy. if this increase were to weaken growth in Europe.

The banking union was decided in 2010, but it is still far from being completed: “I am a little more optimistic about the banking union. We have built strong European surveillance and have just celebrated its tenth anniversary. Nine years ago, when I became governor of the French Central Bank, there was a real problem of fragility of European banks and a risk of a European banking crisis. This risk – he continues – has now disappeared, even though we were forced to increase interest rates and last year a banking crisis broke out in the United States and Switzerland. But we are not yet at the stage of building pan-European banks and we do not have large banks with a cross-border dimension.”

By the way: Unicredit plans to conquer Commerzbank. But German unions, politicians and even the chancellor rebelled against this. Olaf Scholz defined it as a “hostile act”: “I do not comment on specific cases. But this should not be a political or nationalist issue in any country. Fortunately, thanks to the Banking Union, the decision-making process is in the hands of a European institution with an independent and technical assessment, namely the ECB.” Finally, the governor notes that “the ECB will have to decide not only on the agreement itself, with its issues and its financial implications, but also and above all on the solidity, sustainability and governance of a possible new group “.

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