The European Central Bank will not be affected in terms of the first interest rate cut in June by oil price uncertainty, said Governing Council member Francois Villeroy de Galhau.
According to the Bank of France governor, even if the conflict in the Middle East pushed up oil costs, policymakers would first need to analyze whether such a shock fed into underlying prices and inflation expectations. This means there is no “mechanical” reaction, he said in an interview with Les Echos published on Sunday.
Asked if uncertainty could delay the start of monetary easing, he said “no, unless there is a surprise, we shouldn’t wait too long.”
ECB officials are converging on a position to cut interest rates on June 6. Villeroy strongly supported such a move.
“From the point where we have sufficient confidence that we will achieve the 2% inflation target by next year, our task is to minimize costs in terms of activity and employment,” Villeroy said. “This is the logic of a first reduction in June.”
And while the June move looks more certain, the ECB’s path thereafter is not, as central bankers are divided over how much tapering to commit to. Villeroy said there would be further future cuts at a “realistic pace”.
Tags: Villeroy EKT Unaffected price oil interest rate cut June
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