ECB’s Options Remain Open At Coming Meetings, Villeroy Says

(Bloomberg) -- European Central Bank Governing Council member Francois Villeroy de Galhau said interest rates are near a peak, but declined to indicate if that means the institution should hike or hold next week.

“I'm not going to say today what we will decide Sept. 14, all the more so because our options are open for this meeting as they are for following meetings,” the Bank of France Governor said on BFM Business. “But I'm convinced we are close or very close to the high point of interest rates.” 

He added keeping borrowing costs high for a sufficiently long period is now more important than raising rates “significantly” again. 

Villeroy's reluctance to comment on next week's decision echoes ECB President Christine Lagarde, who has stuck to her stance that the meeting could see either a 10th straight increase or a hold. 

Data last week showed underlying inflation — a metric officials have been watching keenly — slowed in August, though the headline number held steady. At 5.3%, both are significantly above the ECB's 2% goal.

In the television interview on Wednesday, Villeroy said inflation passed its peak at the start of the year and underlying measures in April. Recent fluctuation in the oil price should not change the underlying dis-inflationary trend, he added.

Villeroy also said that he expects to revise up the central bank's growth forecast for France after a positive surprise in the second quarter. Other countries including Germany are suffering more from a slowdown in China and the energy crisis, but the entire currency bloc should still avoid a recession, he said.

“For the entire euro zone, we don't see a recession today,” Villeroy said. “The picture for France and the euro zone is slightly positive growth, slower growth.” 

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