ECB Policymakers Advocate for Further Rate Cuts

Two European Central Bank policymakers expressed support for further interest rate cuts, indicating confidence in achieving the ECB's inflation goals next year. The ECB had held rates steady, but officials expect cuts in September and December. Surveys indicated companies foresee moderate price hikes and continued slowing inflation.

Two European Central Bank (ECB) policymakers on Friday backed additional interest rate cuts, expressing increased confidence in achieving the ECB's inflation target next year.

On Thursday, the ECB opted to maintain its current rates, with President Christine Lagarde stating that the next decision in September was still "wide open." However, on Friday, French Governor Francois Villeroy de Galhau and Lithuanian colleague Gediminas Simkus were more explicit, supporting market expectations of two rate cuts this year, in September and December.

Villeroy stated in a French radio interview that market expectations for the path of interest rates seemed reasonable. Simkus, speaking in Vilnius, indicated rates would significantly decline, aligning with projections for the rate on bank deposits to drop from 3.75% to 2.5% by the end of next year. ECB surveys also showed that companies expected only moderate price increases, while Finnish Governor Olli Rehn highlighted concerns over a prolonged industrial downturn impacting growth.