FX.co ★ ECB sees no need for rate hikes despite higher oil prices

According to François Villeroy de Galhau, a member of the European Central Bank Governing Council, rising oil prices do not have a significant impact on overall inflation in the euro area. The regulator has not found evidence that the current increase in energy costs justifies immediate monetary policy tightening.

In an interview with France 5, Villeroy de Galhau emphasized that the ECB is prepared to raise interest rates only if "second-round effects" emerge that could make inflation broad-based and persistent. The bank is closely monitoring whether rising commodity costs are passed on to industrial goods, food, and services, which account for 50% of consumption in the region. Villeroy de Galhau remarked, “If we see such second-round effects, we'll act and raise rates to prevent inflation becoming broad and sustainable.” Currently, there are no signs of systemic price pressure spreading throughout the bloc’s economy.

Last Thursday, the ECB left interest rates unchanged, postponing discussions about potential adjustments until its meeting on June 10-11, 2026. Within the leadership, there are polarized opinions: Bundesbank President Joachim Nagel advocates for a rate hike in the absence of improved growth forecasts, while Peter Kazimir from Slovakia describes such a move as “practically inevitable.” Meanwhile, Villeroy de Galhau is set to step down at the end of May 2026 and will therefore miss the June meeting. In a letter to French President Emmanuel Macron this week, the official stressed the need for a balance between caution and decisive action from the regulator.