Tensions in Middle East unlikely to affect ECB interest rate plans

(MENAFN) François Villeroy de Gallo, the Governor of the French Central Bank, expressed confidence that the current tensions in the Middle East are unlikely to lead to a significant rise in energy prices, asserting that the conflict should not derail the European Central Bank's (ECB) plans to begin reducing interest rates in June. In an interview with the economic newspaper Les Echos, Villeroy emphasized the steadfast commitment of senior policymakers within the ECB to initiate interest rate cuts as scheduled, without the need for further delay barring any unforeseen developments.

Villeroy underscored that there should be no need for a prolonged wait if no unexpected events occur, reaffirming the ECB's position on commencing interest rate reductions in June. He stressed the importance of implementing these rate cuts in a pragmatic manner, with subsequent reductions to follow as deemed necessary. Despite the ongoing tension in the Middle East, Villeroy maintained that it does not currently pose a significant threat to the ECB's objective of reducing inflation to two percent by 2025.

While acknowledging the potential impact of geopolitical tensions on energy markets, Villeroy noted that the conflict has not yet led to a noticeable increase in oil prices. However, he emphasized the importance of monitoring the situation closely and evaluating its potential implications for monetary policy, particularly with regards to core inflation beyond commodity prices.

The ECB reiterated its intention to lower interest rates in June during a recent statement, although policymakers remain divided on the subsequent steps and the extent of the rate reductions required to stimulate economic growth. While recognizing the risks posed by energy market volatility and geopolitical tensions, policymakers remain steadfast in their commitment to implementing interest rate cuts as part of their broader efforts to support the economy.

Villeroy's remarks highlight the ECB's cautious approach to managing monetary policy amidst geopolitical uncertainties, emphasizing the need for a balanced assessment of risks and potential impacts on inflation and economic growth. As the situation evolves, the ECB will continue to closely monitor developments and adjust its policy stance accordingly to ensure stability and resilience in the Eurozone economy.



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