ECB‘s Villeroy: Middle East Tensions Unlikely to Affect June Rate Cut

21 April 2024

By Aurėja Bobelytė – VILNIUS (Econostream) – Tensions in the Middle East should not cause a rise of oil prices that would delay an interest rate cut in June, European Central Bank Governing Council member François Villeroy de Galhau said Sunday.

In an interview with Les Echos, Villeroy, who heads Banque de France, said, ‘Today, the conflict does not lead to a sharp rise in oil prices’ and should not impact the expected 2% inflation target.

If the conflict were to cause an energy price shock, ‘we would have to analyse monetary policy for whether this shock is temporary and limited, or whether it is transmitted - beyond commodities - to underlying inflation’, he said.

Asked if uncertainty about oil prices could affect the ECB’s plans of cutting key interest rates in June, Villeroy assured that it should not be the case, unless something unexpected occurred.

‘From the point we have sufficient confidence in the fact that we will meet the 2% inflation objective by next year, our duty is to minimise the cost in terms of activity and employment. That is the sense of a first cut in June’, he said.

Interest rates should be cut gradually at a pragmatic pace, he added.