French Central Bank Governor: The European Central Bank should tighten interest rates when data allows.

The President of the Bank of France stated that, in assessing the inflationary pressures caused by the Iran war, the monetary policy of the European Central Bank must remain cautious but vigilant. Franois Villeroy de Galhau wrote in his annual letter to French President Emmanuel Macron that the European Central Bank should be prepared to take action without hesitation to prevent the rise in energy costs from transmitting to second-round effects, such as through wages. However, he said that the bank can only take action once it has collected enough data on the transmission to more basic price pressures. The European Central Bank kept its key interest rate at 2.0% last week. Villeroy de Galhau said that this war "clearly represents a negative supply shock," leading to a slowdown in French economic growth and exacerbating inflation.