(Adds detail, background)
PARIS, Feb 17 (Reuters) - The European Central Bank
interest rates are likely to reach their peak over the summer
and a rate cut this year is out of the question, French ECB
policymaker Francois Villeroy de Galhau said on Friday.
In an effort to steer record inflation towards its 2%
target, the ECB has hiked rates by a combined 300 basis points
to 2.5% since last July and promised to deliver a further 50
basis point increase in March.
In a speech to financial analysts, Villeroy, who is also
governor of the French central bank, said that rates would then
"probably" reach their peak in the summer, at the latest by
September.
Markets took the ECB's February policy statement as a signal
that rates could peak at a lower level than earlier thought and
investors quickly priced out a 25 basis point rate hike.
Subsequent pushback by a plethora of policymakers reversed
market moves, however, and the terminal rate is now seen around
3.75%, suggesting another 125 basis points of rate hikes,
including the 50 basis point move in March.
Villeroy said that how long interest rates are kept at the
peak were also key, adding that they would be kept high as long
as necessary to steer inflation back towards the ECB's 2%
target.
He said that the question of when rate cuts could come lay
further in the future and was "surely not for this year". He
added that it would depend on not only on overall inflation
coming down, but also underlying inflation, which excludes
volatile items like energy prices.
(Reporting by Leigh Thomas, editing by Tassilo Hummel and
Raissa Kasolowsky)
