European Central Bank Governing Council member Francois Villeroy de Galhau indicated that the bank's next action is more likely to involve cutting interest rates rather than raising them.

The French central bank governor stated during a Tuesday interview that this reflects increased downside risks to the inflation outlook. He noted that current monetary policy is in good shape, but circumstances could change.

Speaking at the Bloomberg Global Regulatory Forum in New York, Villeroy remarked, "If we were to take the next step, a rate cut would be more reasonable and more likely than a rate increase. I believe there are fewer upside risks, but more downside risks."

Policymakers like Villeroy have suggested that further rate reductions should not be ruled out if economic growth and inflation perform weaker than expected. Recent data from Germany, the eurozone's largest member, shows continued manufacturing weakness, while political turmoil in France is also dampening confidence.

Officials including Spain's Jose Luis Escriva and Latvia's Martins Kazaks have indicated no current bias toward rate cuts, noting that the ECB could ultimately choose to raise rates instead. However, Chief Economist Philip Lane pointed out that while he sees no immediate need for action, the potential options lie between maintaining current rates or cutting them.

The 2% deposit rate is widely viewed as the neutral level — neither restraining nor stimulating demand. Economists and investors are not anticipating further policy easing.

President Lagarde stated earlier Tuesday in a CNBC interview that despite describing expansion risks as "more balanced" and inflation risks as "fairly balanced," she would "never claim" that rate cuts have ended.

"We are currently in good shape, but I completely agree with President Lagarde's view: good shape is not permanent," Villeroy said.