While inflation slowed to 2.2% year-on-year in August in the Eurozone, the next Governing Council of the ECB is due to take place on 12 September.
Don't act too late
“If we waited until we actually got to 2% to cut rates, we would be acting too late,” says François Villeroy de Galhau, who recalls at “Le Point” magazine that rate increases or decreases always takes some time before it is reflected in the real economy.
To stem inflation, the ECB raised borrowing costs to an unprecedented rate from July 2022.
On June 6, it cut its benchmark rates, providing a small breath of fresh air to ease strains on mortgage and business loans that are slowing economic growth. As a reference, the deposit rate, which was 4%, the highest reached in September last year, was thus reduced to 3.75%.
However, at the next meeting in July, the ECB left its key rates unchanged.
Equal growth in Europe and the United States
Comparing the European and American economies in his interview for “Point”, François Villeroy de Galhau points out that inflation is falling faster on the Old Continent, but that growth is even less dynamic there than in the United States.
“That is why the balance of risks needs to be monitored even more in Europe. Our Board of Governors on September 12 will, in my view, have to act accordingly: it would be right and wise to decide on a further rate cut,” says the governor.