ECB’s Villeroy: there is still gradual margin for rate cuts

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PARIS (Reuters) -U.S. President Donald Trump’s tariff threats are creating uncertainty for economies around the world but there is still margin for further interest rate cuts in Europe as inflation in the euro-zone heads lower, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said on Monday.

“We are in a moment of great uncertainty … Mr Trump’s polices are not working. The policies of this Trump administration are playing against the U.S. economy and unfortunately also against the world economy,” Villeroy – who is also head of the Bank of France – told RTL Radio.

Noting that some economists were even expecting a recession in the United States, Villeroy added: “Protectionism does not work, it means less growth and more inflation.”

Villeroy reaffirmed that he saw no recession risk in France or in Europe, as inflation continued to decline.

“We still have a gradual margin for rate cuts,” he said.

ECB policymakers are becoming increasingly confident about cutting interest rates in June as inflation continues its march lower, but there is little to no appetite for a big move, six sources told Reuters last week.

The ECB trimmed its benchmark rate to 2.25% earlier this month.

(Reporting by Dominique Vidalon;Editing by Sudip Kar-Gupta)