(Bloomberg) -- The European Central Bank will very probably lower interest rates next week and will loosen monetary policy again at future meetings depending on progress combating price rises, Governing Council member Francois Villeroy de Galhau said.
“A cut is very probable, and furthermore it won’t be the last, but the following pace will simply depend on the evolution of the fight against inflation,” he said on Franceinfo radio on Wednesday.
Expectations for a consecutive cut in interest rates next week have gone from near zero after September’s meeting to almost certain in recent weeks. Data have shown the first inflation reading below 2% in more than three years, and surveys have pointed to a deterioration in economic activity.
Investors are now pricing an around 90% chance of a 25 basis-point rate reduction in October.
Villeroy said inflation will be at 2% durably at the start of next year in France and in Europe later next year, even with some “highs and lows” possible in the coming months.
Asked whether the ECB could step up the pace of policy loosening, Villeroy said the ECB would avoid volatile moves.
“We are used to acting with gradualism, which means resolutely but without making too significant steps,” he said.
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