PARIS (Reuters) – The European Central Bank’s interest rates should reach the point where they are no longer a drag on growth by this summer if inflation is tamed by then, ECB policymaker Francois Villeroy said in a speech on Wednesday.
Inflation in the 20-nation euro zone eased over the course of last year towards the ECB’s 2% target, but ticked higher to 2.4% in December from 2.2% in November, which Villeroy said was largely expected.
“If the pullback in inflation is confirmed in the coming quarters as we expect, common sense would have us heading towards the neutral rate without slowing the pace by summer,” Villeroy said in a New Year’s address at the French central bank, which he heads.
The ECB estimates the so-called neutral rate is around 2%.