Despite uncertainty surrounding oil prices, Governing Council member Francois Villeroy de Galhau asserts that the European Central Bank (ECB) remains resolute in its decision to implement an interest-rate cut in June. The Bank of France governor suggests that even if conflicts in the Middle East cause oil prices to rise, policymakers will assess whether such shocks impact underlying prices and inflation expectations before taking action. Villeroy emphasizes that the response won’t be automatic but rather based on careful analysis.
Addressing concerns about potential delays in monetary easing due to uncertainty, Villeroy dismisses such notions, stating that there should be no hesitation unless an unforeseen event occurs. ECB officials are leaning towards lowering borrowing costs at their June 6 meeting, with Villeroy advocating for this move to support economic activity and employment.
While the June rate cut appears increasingly likely, the ECB’s strategy beyond this remains uncertain as policymakers disagree on the extent of easing required. Villeroy suggests that future cuts will be implemented gradually and pragmatically, allowing flexibility in response to external shocks threatening disinflation.
Furthermore, Villeroy emphasizes that ECB decisions won’t be influenced by the Federal Reserve’s actions, indicating a focus on European economic data rather than US indicators. The ECB will monitor the euro’s effects without targeting specific exchange rates. Villeroy underscores the importance of data-driven decisions and a commitment to European economic stability.
