By Yoruk Bahceli and Marc Jones
LONDON (Reuters) -The European Central Bank needs to be even more agile with its interest rate policy following the eruption of the Israel-Iran air war, France’s central bank governor Francois Villeroy de Galhau said on Tuesday.
Villeroy said the ECB was currently “in a good position” after it cut interest rates to 2% this month, but pointed to growing uncertainty given that the Middle East conflict has already pushed oil prices up sharply.
“Underlying inflation, is it affected or not by the spillovers of the commodities prices, the oil price?” Villeroy told the Financial Times’ Global Borrowers & Bond Investors Forum in London.
The ECB needs “agile pragmatism more than ever”, Villeroy added.
Villeroy added that the ECB also needed to take into account the euro’s appreciation in recent weeks.
“We should incorporate this analysis of the exchange rate in our monetary policy decision.”
The common currency has rallied by more than 10% this year and is up more than one percentage point so far this month.
Villeroy said he fully supports calls by ECB chief Christine Lagarde to strengthen the global role of the euro to become a viable alternative to the dollar.
“If the euro has to attract all international investors, we need a deeper, more liquid, more integrated financial market in Europe,” he said.
Member states need a “common calendar” of dates by which to implement former ECB chief Mario Draghi’s recommendations to boost the region’s competitiveness, Villeroy added.
(Reporting by Marc Jones and Yoruk BahceliEditing by Gareth Jones)
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