European Central Bank's Villeroy: Should pay attention to oil prices and the euro when setting interest rates

Member of the European Central Bank Governing Council and Governor of the Bank of France, Francois Villeroy de Galhau, stated that the European Central Bank needs to assess fluctuations in oil prices and the euro when setting borrowing costs. Although the European Central Bank does not have a specific exchange rate target, the euro has shown remarkable strength against the US dollar since President Donald Trump began pushing for tariffs. At the same time, energy prices have risen sharply following Israeli attacks on Iran. In a video interview at the FT Live conference in London, Villeroy said, "We have seen changes in oil prices, we have seen changes from yesterday to today, and we will see them tomorrow too." He also stated that the euro exchange rate "is not favorable for inflation, as we have seen the euro appreciating in recent weeks. We should incorporate our analysis of the exchange rate into our monetary policy decisions." As more ECB officials express satisfaction with maintaining the 2% interest rate level temporarily, most believe that inflation is under control and are waiting for the outcome of trade negotiations between Europe and the US. Villeroy reiterated previous statements, saying that he and his colleagues must be ready to act swiftly on interest rates when necessary. He said, "We should be flexible and pragmatic. There is no pre-set path." Villeroy had previously stated that recent rate cuts by the European Central Bank put it in a "favorable" position, with inflation and the key deposit rate both around 2%. However, he also stated that in times of increased uncertainty, he has no fixed stance on policy. The market expects the European Central Bank to keep rates unchanged at the July meeting. According to sources familiar with the matter, some policymakers have even hinted that loose policies may have come to an end.