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(Bloomberg) — The European Central Bank needs to assess fluctuations in oil prices and the euro as it sets borrowing costs, according to Governing Council member Francois Villeroy de Galhau.
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While the ECB doesn’t target a particular exchange rate, the common currency has demonstrated surprising strength against the dollar since President Donald Trump began his tariff push. Energy prices, meanwhile, jumped after Israel launched attacks on Iran.
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As regards oil, “we see changes, we have seen between yesterday and today, we will see tomorrow,” Villeroy said in a video interview at the FT Live conference in London. The euro rate “plays against inflation because we have seen an appreciation not since last Thursday but in the more recent weeks. We should incorporate this analysis of the exchange-rate in our monetary-policy decision.”
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The Bank of France head spoke as officials increasingly signal that they’re content with keeping interest rates at their current level of 2% for now. Most consider inflation to be largely under control as they await the outcome of Europe’s trade negotiations with the US.
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Reiterating previous language, Villeroy said he and his colleagues must stand ready to act quickly on rates should the need arise.
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“We should be agile and pragmatic,” he said. “There is no pre-set course.”
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Villeroy has previously stated that the ECB’s most recent rate cut left it in a “favorable” zone with inflation and the key deposit rate both around 2%. But he’s also said he has no fixed position on policy amid elevated uncertainty.
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The ECB is expected to stay on hold at its July meeting. Some policymakers have even suggested easing may be over, according to people familiar with the matter.
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