(Bloomberg) -- The European Central Bank should keep lowering borrowing costs at every meeting as long as the retreat in inflation matches its projections, according to Governing Council member Francois Villeroy de Galhau.
Cuts should continue until the deposit rate — currently 3% — reaches a level that neither restricts nor stimulates the region’s 20-nation economy, the Bank of France chief said.
“If the easing of inflation is confirmed in coming quarters as we forecast, it makes sense to go toward this neutral rate by next summer without slowing the pace,” Villeroy said Wednesday in a speech in Paris. “This rate isn’t directly observable but it is on average close to 2% in the euro zone, according to ECB estimates.”
The remarks align Villeroy with wagers in money markets and predictions by economists for rate cuts at the ECB’s next four meetings. Despite inflation accelerating for a third month in December, the first of those reductions is expected in three weeks, with officials still confident that their 2% price target will be met sustainably this year.
Indeed, Villeroy said the recent inflation data, which produced a reading of 2.4% for last month, don’t represent a setback for the ECB’s effort to tame prices.
“The slight rise in December was expected, and does not call into question the ongoing victory over inflation,” he said.
Bloomberg Economics forecasts inflation of 1.7% for the euro region in 2025.
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