PARIS: France’s central bank chief has called for the European Central Bank to cut interest rates at its next meeting in September as eurozone inflation gradually eases. Reducing borrowing costs at the meeting would be “fair and wise”, Bank of France governor Francois Villeroy de Galhau said in an interview with Le Point magazine published Friday.

“We are not yet at our two percent inflation target on a permanent basis, but we will very probably be there in the first half of next year for France and in the second half for the eurozone,” he said.

Data this week showed that inflation in France and Germany, the eurozone’s biggest economies, had fallen below two percent this month. And official data released Friday showed consumer price rises in the 20 countries that use the euro eased to 2.2 percent in August, their lowest level in more than three years and not far off the ECB’s two-percent target.

“If we waited until we were actually at two percent to lower rates, we would be acting too late,” said the French central bank chief, noting that it takes some time for monetary policy changes to feed through to the economy. The Frankfurt-based ECB launched a historic campaign of interest rate hikes in 2022 after Russia’s invasion of Ukraine sent energy and food costs soaring. Inflation peaked at 10.6 percent in October that year.

With inflation easing, the ECB cut rates for the first time after the hiking cycle in June. It kept borrowing costs on hold in July but expectations have been growing for a further cut at its meeting on Sept 12. Earlier Friday, ECB board member Isabel Schnabel said, however, that rate setters should proceed “gradually and cautiously” in loosening monetary policy as there were still challenges in tackling inflation. In a speech in Estonia before the latest eurozone inflation figures were released, she cautioned that headline inflation “understates the challenges monetary policy is still facing”.

She pointed in particular to stubborn inflation in the services sector. The central bank currently expects inflation to fall back to its two-percent target at the end of 2025, she said. The French economy grew at a slower pace than previously thought in the second quarter, official data showed Friday, while inflation cooled to a three-year low in August. Gross domestic product expanded by 0.2 percent in the April-to-June period compared to the first quarter, according to the INSEE statistics agency. In its July estimate, the agency reported growth of 0.3 percent, similar to the first quarter performance. — AFP