ECB’s Villeroy: We will be at the terminal rate not later than by summer


“I expect today that we will be at the terminal rate not later than by summer,” European Central Bank (ECB) policymaker Francois Villeroy de Galhau said while speaking at an event held at the Bank of France on Monday, per Reuters.

Key takeaways

“Primary question today is not how much further to hike rates, but how large is the pass-through of what is already in the pipe.”

“In current tightening cycle, the lag in policy transmission may be at the upper end of 1-2 year range.”

“Deceleration in rate increases from 50 bp to 25 bp was wise and cautious.”

“We need to monitor the pass-through of our substantial and exceptionally rapid past hikes.”

“How long we maintain rates high is now more important than the precise terminal level.”

“We will remain data driven, looking meeting by meeting at the outlook for inflation and strength of monetary policy transmission.”

Market reaction

EUR/USD stays on the back foot following these comments and was last seen trading a few pips above 1.0800.

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