ECB's Villeroy says markets 'overreacted' with rate hike bets

FRANKFURT (Reuters) - Investors betting on more interest rates hikes by the European Central bank have 'overreacted' to strong U.S. data and ECB communication since last week, the Banque de France Governor said in an interview published on Wednesday.

"There is an excess of volatility in the terminal rate expectations," François Villeroy de Galhau told French daily Les Echos. "Put differently, markets have overreacted a little since Thursday."

Villeroy said that peak interest rates could be reached by the end of the summer but the ECB was under no obligation to raise rates at each of its meetings until September.

(Reporting By Francesco Canepa)