PARIS (Reuters) – Inflation should still land at the European Central Bank’s target of around 2% by 2025 despite the violence in Israel weighing on commodity prices, ECB policymaker Francois Villeroy de Galhau said on Tuesday.
In an interview with franceinfo radio, Villeroy said the ECB was particularly wary about oil price developments but added those prices only accounted for a small chunk of overall inflation, which is still “clearly” decreasing as a whole.
Oil prices eased on Tuesday after rallying more than 4% in the previous session, with traders cautious as they keeps tabs on potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas.
Some fear that the latest war between might have the same effect on oil prices as the 1973 Yom Kippur War, when an attack launched on Israel by a coalition of Arab states led by Egypt and Syria led to a major energy crisis in the West.
“I don’t think that we are today in a similar situation (as the Kippur War) but we must of course remain very vigilant. It adds to economic uncertainty, ” Villeroy said.
He also said ECB’s current interest rates, set last month at a record 4% after 10 successive hikes, were at a “good level”, adding that now was not the right time for further increases.
(Reporting by Benoit Van Overstraeten; Editing by Tassilo Hummel)
