PARIS, March 20 - The European Central Bank will neither remain inactive nor overreact in response to volatility in oil and gas markets and is prepared to act to bring inflation back to its 2% objective, Francois Villeroy de Galhau, governor of the Bank of France and an ECB policymaker, said on Friday.
Speaking in an interview with the Financial News website Boursorama, Villeroy emphasised the bank's readiness to respond to developments in energy markets. "We have the eyes on the ball and the hands ready to act," he said, indicating a stance that balances vigilance with measured intervention.
Villeroy said choices on potential interest-rate moves will be taken on a meeting-by-meeting basis. He added that, at present, a rate increase is more likely than a reduction in rates, but he did not categorically exclude the possibility of a cut.
The comments follow the ECB's decision to keep its key policy rate at 2% on Thursday. Policymakers have signalled they expect to discuss further tightening in coming months amid a rise in energy costs tied to geopolitical developments.
Oil and gas prices have climbed since U.S.-Israeli attacks on Iran began, the central bank official noted. That jump in energy costs poses the risk that higher fuel prices will feed through to consumer prices and, in turn, weigh on economic activity across the euro zone, which the ECB described as a 21-nation currency bloc that relies heavily on imported fuel.
Villeroy's remarks underscore the ECB's dual concern: guarding its inflation target while avoiding abrupt policy moves that could unsettle growth. By framing decisions as meeting-specific, he signalled flexibility and a willingness to adapt to evolving data on energy prices and inflationary pressures.
How policymakers respond in upcoming meetings will depend on the trajectory of energy costs and their transmission to consumer prices and broader economic activity within the euro area. For now, the balance of risk has tilted toward the prospect of further tightening rather than easing.