PARIS (Reuters) – Tension in the Middle East is not likely to increase energy costs and must not impact the European Central Bank’s strategies to begin cutting rates of interest in June, French reserve bank chief Francois Villeroy de Galhau stated on Sunday.
“Barring surprises, there is no requirement to wait a lot longer”, Villeroy informed company day-to-day Les Echos in an interview, repeating the mentioned position of senior ECB policymakers that the euro zone’s reserve bank will begin cutting rates in June.
“It must be followed by additional cuts, at a practical rate,” Villeroy stated, including that stress in the Middle East in the meantime do not threaten the target of bringing inflation to 2% by 2025.
“At the minute, the dispute is not causing a significant increase in oil costs. If this were ever the case, we would need to evaluate financial policy for whether this shock is short-term and minimal, or whether it is transferred – beyond products – to underlying inflation”, he stated.
The ECB made it clear on Thursday a rates of interest cut was anticipated in June, however policymakers varied on subsequent relocations and on how low rates of interest require to be up to promote the economy.
Policymakers stated energy market volatility and geopolitical stress were a danger to inflation, however that the effect has actually not sufficed to stop inflation falling.