The European Central Bank (ECB) should maintain its policy of cutting interest rates to achieve a 2% target by the summer, as the fight against inflation nears its conclusion, according to Francois Villeroy de Galhau, a member of the ECB’s Governing Council.
Villeroy, who also serves as the head of the French central bank, emphasized that the neutral rate—the theoretical level that neither stimulates nor restricts economic activity—is approximately 2% for the eurozone. Despite three consecutive reductions of 25 basis points, the ECB’s deposit rate currently stands at 3%.
“If inflation continues to subside as we anticipate in the coming quarters, reaching a 2% rate by next summer is logical without slowing the pace of cuts,” Villeroy stated during a hearing with the finance committee of France’s Senate on January 15.
He added that this approach would benefit both economic financing and help reduce the household savings rate.
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