ECB Villeroy's Says Soft Landing for Eurozone Is in Sight

By Paul Hannon

A soft landing is in sight for the eurozone as inflation falls toward the European Central Bank's target and borrowing costs are lowered, the governor of the Bank of France said.

In a speech to an audience in Vienna, Francois Villeroy de Galhau also said Tuesday that the timing of future rate cuts should be decided upon "without haste nor procrastination."

The ECB lowered its key interest rate to 3.75% from 4% Thursday, a sign that policymakers are confident inflation will fall to their 2% target and stay there.

Villeroy said the return of inflation to target would likely be accomplished without a jump in unemployment and a big fall in economic output, a rare outcome known as a "soft" landing.

"We have succeeded so far to achieve both disinflation and a soft landing in the face of supply shocks, something quite unprecedented," he said.

Villeroy said the neutral interest rate for the eurozone, at which policy is neither stimulating nor damping activity, is around 2% to 2.5%.

"Therefore we are still actively fighting inflation," he said.

Write to Paul Hannon at [e-mail]

(END) Dow Jones Newswires

06-11-24 0820ET