PARIS, March 20 (Reuters) – The European Central Bank will not be inactive or overreact to the oil and gas price volatility and is ready to act to stabilise inflation at its target of 2%, Bank of France Governor and European Central Bank policymaker Francois Villeroy de Galhau said on Friday.
“We have the eyes on the ball and the hands ready to act,” he said in an interview with Financial News website Boursorama.
Potential rate hikes will be decided meeting by meeting, he said. He added that a rate increase was likelier than a rate cut, though he did not completely rule out the latter.
The ECB kept its key interest rate at 2% on Thursday, but policymakers expect to discuss hikes in the coming months as the Iran war pushes up inflation in the euro zone.
Oil and gas prices have jumped since U.S.-Israeli attacks on Iran began, raising the risk that higher energy costs will drive up consumer prices and depress economic activity across the 21-nation currency bloc, which relies heavily on imported fuel.
(Reporting by Makini Brice, Gianluca Lo Nostro and Inti Landauro; Editing by Aidan Lewis)
