Moulin’s comments reinforce a growing sense among some Governing Council members that the tightening cycle has peaked, a message likely to support the case for investors who have already pared bets on further hikes this year. His explicit framing of the Hormuz reopening as good news links the ECB’s rate path directly to the same de-escalation trades moving oil and broader risk markets. At the same time, his refusal to offer forward guidance beyond a meeting-by-meeting approach leaves room for other Council members who worry about second-round effects on wages and services, meaning euro rate markets are likely to stay sensitive to any fresh inflation surprises rather than settling on a single direction.
Governor, Banque de France, and ECB Governing Council member Emmanuel Moulin said the bank is in a good position after June’s rate hike, citing easing oil-driven inflation and the Hormuz reopening, and ruled out entering a new tightening cycle.
Summary:
- ECB Governing Council member Emmanuel Moulin said the bank is in a “good position” following last month’s rate hike, with inflation easing alongside the slump in oil prices
- Moulin, who heads the Banque de France, said the sharp fall in oil prices “reassures us” and improves the ECB’s position on rates, while declining to offer forward guidance on July
- He described June’s 25 basis-point hike as “perfectly legitimate” in all scenarios and said the milder policy scenario had given policymakers greater confidence in the decision
- Moulin said the Governing Council had already made clear it was “not entering into a new cycle” of rate increases
- He called recent developments around the Strait of Hormuz “good news” and said the bank remained “comfortable” in its base economic scenario
- Investors have pared bets on further ECB tightening this year, with some analysts now seeing inflation’s peak as having passed, even as other policymakers warn of risks from wages and services
The European Central Bank is in a “good position” following last month’s interest rate increase, Governing Council member Emmanuel Moulin said, as easing inflation and a sharp slump in oil prices give policymakers greater confidence heading into their next meeting.
Speaking separately at the Rencontres Economiques conference in Aix-en-Provence and in a Bloomberg TV interview, Moulin, who also heads the Banque de France, said the rapid fall in oil prices had reassured the Governing Council and improved its position on rates, while stressing that the ECB does not do forward guidance and that he would not say what the bank plans for July. He described June’s 25 basis-point increase as “perfectly legitimate” under all of the bank’s forecast scenarios, and said the presence of a milder scenario at the time had given policymakers greater confidence in backing the hike unanimously.
Moulin pushed back on the idea that June marked the start of a new tightening phase, saying the Governing Council had already signalled clearly that it was “not entering into a new cycle” of rate increases and that future decisions would continue to be made on a meeting-by-meeting basis. He said he did not expect the ECB’s coming policy meetings to be more difficult from a decision-making standpoint, adding that the bank remained comfortable within its base economic scenario and that recent developments around the Strait of Hormuz amounted to “good news” for the outlook. At 2.25%, he noted, ECB rates remain very low compared with those of other major central banks.
The comments come as ECB policymakers show signs of division over the path ahead. June’s hike was backed unanimously amid concerns that surging oil prices tied to the Iran conflict were spreading through the broader economy, but the subsequent peace deal and a sharper than expected slowdown in inflation have opened debate over next steps. Some Council members worry the recent bout of energy cost pressure could still filter through to food, services and wage demands even as it fades, while others point to the changed backdrop as grounds to hold rates steady for now. Investors have already trimmed bets on further tightening this year, and some economists now believe inflation has passed its peak, leaving the ECB’s next moves as one of the more closely watched questions in European markets.
Source: Original Article
