The European Central Bank (ECB), due to the high degree of current uncertainty and for reasons of pragmatism, will not provide guidance on the interest rate cuts it will undertake beyond the one announced for June this Monday.
This position was expressed this Monday by the head of the Bank of France, François Villeroy de Gallo, a member of the ECB Governing Council, at a press conference in Paris.
Galhau stressed that the price of oil has not risen as tensions have risen in recent days in the Middle East conflict.
The French central bank governor insisted that ECB Council members will continue to closely monitor the oil price variable, which if it rises could have an impact on overall inflation.
In any case, he indicated that the time has come for the ECB’s first rate cut “at the beginning of June, unless there is a surprise.”
But “we will not make recommendations regarding future cuts” given the uncertainty, Gallhau added, and also recalled the three quadrants that characterize the ECB’s actions: the overall evolution of inflation, the evolution of core inflation (which excludes the most volatile elements such as energy and food) and “good monetary policy transmission.”
“Fortunately, we are emerging from the inflation crisis,” with annualized inflation at 2.4% in March in both the eurozone and France.
Inflation peaked at 10.6% in the eurozone in October 2022 and 7.3% in France in February 2023.
The Bank of France estimates that inflation in France will fall to an average of 2.5% this year and 1.7% in 2025.