In his statement today (Sunday), the President of the Bank of France, Francois Villeroy de Galhau, stated that the European Central Bank (ECB) is on track to initiate a series of interest rate cuts starting from June, despite the ongoing tensions in the Middle East.

According to Villeroy, the current situation in the Middle East has not led to significant increases in energy prices that would require a deviation from the ECB's interest rate reduction strategy, which aims to reduce inflation to the 2% target by 2025.

Villeroy's comments in an interview with business newspaper Les Echos support the ECB's statement on Thursday that a rate cut is expected in June. Villeroy emphasized that tensions in the Middle East are being monitored but have not yet caused a significant impact on oil prices or the broader inflation trend. Future monetary policy adjustments will depend on whether potential shocks from rising oil prices are temporary and limited, or begin to affect underlying inflation beyond commodity prices, Villeroy said.

The ECB's plan to cut interest rates comes as policymakers seek to stimulate the economy and ease inflation concerns. Although energy market fluctuations and geopolitical tensions are considered risks for inflation, these effects have not been significant enough to stop the decline in inflation rates.

Villeroy also emphasized that interest rate cuts after June will be carried out at a "pragmatic pace", pointing to a cautious and measured approach in the ECB's efforts to support the economic growth of the euro area while managing inflation. This approach reflects the central bank's commitment to adapt to changing economic conditions while pursuing its inflation target.

-Investing.com