ECB Governing Council member and head of the Bank of France Francois Villeroy de Galo said that the European Central Bank is likely to accelerate the pace of reduction of the bond portfolio from July 2023, as part of measures to combat inflation. Yesterday, on December 15, the ECB raised key rates by 50 bp, and also announced that from March 2023, the regulator will reduce the portfolio of bonds purchased under the Asset Purchase Program (APP) by an average of 15 billion euros per month until the end of the second quarter of 2023. After this period, the ECB will determine further rates of reduction. ECB Head Christine Lagarde also noted that the regulator needs to raise rates higher than the markets predict, and markets should expect their further rise at a rate of 50 bps. According to her, the change in interest rates is the main instrument of the central bank's PREP, and «quantitative tightening» is only an addition to it. Moreover, the rate increase remains a key tool in the fight against high inflation, which may peak in the first half of 2023. Forecasts regarding the future state of the European economy turned out to be more positive: Villeroy de Galo predicts that it is possible to avoid the so-called «hard landing», and in 2024-2025 Europe is waiting for a confident recovery.
