ECB's Villeroy: I do not expect a rate hike at next week's ECB meeting

The European Central Bank (ECB) is unlikely to raise interest rates at its upcoming policy meeting amid rising oil prices linked to the war in Iran, according to Governing Council member François Villeroy de Galhau. Speaking on France Inter radio on March 5, 2026, Villeroy emphasized that policymakers are closely monitoring energy markets and financial developments but stressed that “today I don’t see any reason why we at the ECB should raise our interest rates”. He highlighted that the decision will hinge on whether the conflict’s impact on prices proves temporary or persistent.

The escalation in Middle East tensions has pushed oil prices higher, reigniting inflation concerns. However, Villeroy noted that central banks typically focus on broader inflation expectations rather than short-term volatility. He compared the current situation to the 2022 inflation surge following Russia’s invasion of Ukraine but stated the current shock, while serious, is not yet comparable in scale. The ECB will conduct a comprehensive assessment at its next meeting on March 20, ensuring a “meeting-by-meeting” approach to policy adjustments.

Villeroy also downplayed recession risks for the eurozone, citing France’s “resilient” 1% growth and relatively low inflation compared to other euro area economies. His remarks align with the ECB’s recent data-dependent strategy, as outlined in 2023 policy decisions, which prioritize gradual rate hikes and restrictive measures to anchor inflation expectations. While energy price pressures remain a key focus, the ECB appears poised to maintain current rates until more definitive economic signals emerge.