ECB’s Villeroy sees rate hike quarters, not years, after QE


FRANKFURT • European Central Bank (ECB) policymaker Francois Villeroy de Galhau said the institution’s first interest-rate increase could come “at least some quarters, but not years” after policymakers end their bond-buying programme.

In an interview in Paris, the French central banker played down concerns about the euro-area’s first-quarter economic slowdown and signalled that the ECB is still likely to halt quantitative easing (QE) this year. He said inflation will resume its acceleration in coming months, with underlying price pressures set to strengthen as the bloc’s temporary weakness passes.

“We will probably give additional guidance for the end of the year for the timing of the rate hike and the contingencies,” Villeroy said in a Bloomberg TV interview with Francine Lacqua. “We’ll see exactly how we formulate it. We’re predictable, and it’s a clear virtue of our gradual normalisation path, but we are not precommitted.”

ECB policymakers have yet to formally discuss the future of their QE programme. Purchases are currently scheduled to run until at least September, totalling more than €2.5 trillion (RM11.85 trillion), and officials expect interest rates to stay at current record lows until “well past” the end of net buying. Maturing debt will be reinvested.

The slow progress toward ending stimulus largely reflects muted consumer- price growth — a phenomenon that much of the industrialised world is experiencing. Speaking at the same event in Paris, US Federal Reserve Bank of Cleveland president Loretta Mester said it was too soon to declare the US central bank has reached its inflation goal “on a sustained basis”.