By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Emmanuel Moulin said on Friday that conditions had moved back closer to the ECB's June baseline, saying this was why policymakers had left interest rates unchanged at their July meeting.

In an interview with French broadcaster BFM Business, Moulin, who heads the Banque de France, said the ECB had kept rates unchanged in July "because in June we had raised our rates."

He said the June decision had been taken in response to higher inflation, particularly from energy prices, and to prevent the shock from spreading more broadly across the economy.

Moulin cited the ceasefire and weaker-than-expected June inflation data as "rather good developments," but said the resumption of the conflict had changed the picture.

"We more or less returned to the June situation," he said. "That meant the rate increase we had implemented in June was fully justified. That's why we decided to keep our rates unchanged this week."

Asked about recent developments in the Red Sea, Moulin said rising tensions remained a concern because they could push oil prices higher.

"The risk, of course, is that this increase in oil prices feeds through to other prices, particularly services prices and transport prices," he said. "That is exactly what we want to avoid: an overly broad pass-through of this energy inflation."

He said the ECB would closely monitor both the magnitude and the persistence of the shock.

 

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