The reduction in interest rates is expected to occur at some point in 2024, said the President of the Bank of France and member of the European Central Bank (ECB), Francois Villeroy de Galhau, on Tuesday.
Villeroy also reaffirmed on France Inter radio that inflation is expected to fall back to 2% by 2025 at the latest.
“I will say this very clearly this morning – it is not just a prediction, but a commitment. We will bring inflation down to 2% between now and 2025, at the latest,” Villeroy said.
“Inflation has been the main concern for the French, and it is starting to decrease,” he added.
Last week, the ECB opposed expectations of imminent interest rate cuts, reaffirming that borrowing costs would remain at record lows despite lower inflation expectations. The ECB also left borrowing costs unchanged and didn’t even hint at a possible reduction.
Seven people familiar with the matter also told Reuters last week that ECB policymakers do not expect to change their message about the need for higher interest rates before the March meeting, making any rate cuts unlikely before June.
“We had to increase interest rates to combat the illness of inflation (…) Between this increase, which, without any surprise, is already over, and the reduction that is expected to occur at some point in 2024, there is a plateau,” Villeroy said.
Earlier on Tuesday, the Bank of France predicted that the French economic activity would only recover in 2025.
Villeroy said that although there was some element of slowdown in the French economy, there was no recession.