Our Governing Council, led by Christine Lagarde, has just taken a critical decision with a first rate cut. This signals our confidence in the “soft landing” that is currently underway, beyond monthly fluctuations in inflation from now until the end of 2024, largely due to energy-related base effects. Indeed, the data published this morning show that the compensation per employee is still rising steadily, but that overall unit labour costs are continuing to decelerate and profit margins are contracting. Barring any external shocks, inflation will indeed come back down towards 2% by next year, and probably a little faster in France than the European average. This rate cut will help to support activity, as we have already seen in France with the recovery in new housing lending that started in April.
The 2% target is therefore in sight, our efforts have been effective, but we are certainly not relaxing our resolve: confidence requires vigilance. We will adjust the precise pace of our next interest rate cuts, without haste or procrastination, over time as future outlook for disinflation is confirmed. As for monetary policy, although it has become less restrictive since yesterday, it will continue to bring down inflation with interest rates that are still significantly above the neutral rate. It is by resolutely fighting against price increases, and thus fighting for purchasing power, that monetary policy makes its greatest contribution to supporting growth.
