MNI BRIEF: ECB's Villeroy-If Rates Move, More Likely To Be Cut

The European Central Bank is more likely to cut than increase its deposit rate if it adjusts it over the next few months, though the ECB also has to be alert to the inflationary impact of higher oil prices, Bank of France Governor Francois Villeroy said in a speech in Florence on Thursday, 

"The current assessment suggests that, barring a major exogenous shock, including possible new military developments in the Middle East, if monetary policy were to move in the next six months, it could be more in the direction of accommodation," Villeroy said, adding that monetary policymakers needs to remain alert and agile given uncertainties over trade and the conflict in the Middle East.

The ECB could also respond if oil price rises started to impact underlying inflation, he said. 

"We will monitor closely the possible spillovers of energy prices. If ever these consequences happened to be lasting and propagating – i.e. affecting underlying inflation and inflation expectations –, we could possibly adapt our monetary policy: to put it short, no automatic monetary reaction." (See MNI SOURCES: ECB Eyes July Pause, Tariffs Key To Cut Timing)