French Prime Minister Urges ECB to Cut Rates Faster

PARIS (Reuters) – French Prime Minister Francois Bayrou urged the European Central Bank to cut rates faster to support economic growth in Europe, as inflation returns to normal levels. He emphasized the need to compete with superpowers like China and the United States.

> “When will the European Central Bank actively support the economic activity of countries in the (European monetary) Union?” Bayrou questioned during an interview with La Tribune Dimanche newspaper.

He stated, “The ECB will have to cut rates too. If it doesn’t, we won’t be on equal terms with Chinese and American competition,” marking a rare comment on monetary policy from a French leader.

The ECB recently cut interest rates by 25 basis points, marking the fifth reduction since June. The central bank lowered the deposit rate from 3.0% to 2.75%.

Despite this, rates remain significantly higher than pre-inflation levels caused by the Russian invasion of Ukraine, which led to rising energy prices. This situation has made borrowing more expensive for households and companies, stifling growth.

Inflation in France is currently below the ECB’s 2% target, lower than the eurozone average of 2.4%. Meanwhile, unemployment in France has begun to rise again, and the economy contracted by 0.1% in the final quarter of 2024.

Some economists question whether the ECB is “behind the curve” in rate cuts, as current rates might still be hampering growth amid economic challenges like the German economy contracting and inflation subsiding.

In the same interview, Bayrou confirmed his intention to use special constitutional powers to pass the French budget, as France has entered 2025 without a budget due to the previous government’s collapse.