ECB's Villeroy: The ECB could still cut rates despite oil market volatility

• The conflict in the Middle East has not altered the underlying inflation outlook for now.
• Inflation expectations remain moderate.
• Significant appreciation of the Euro partly offset the rise in oil prices.
• Now we are back to normal but this does not mean the ECB would keep rates at this level.
• The conflict in the Middle East is a new source of uncertainty.
• The oil price per se is not a sufficient guide for out reaction function.
• If we were to see spillovers to underlying inflation and de-anchoring of inflation expectations, then we could possibly adapt monetary policy.
• We will stick to data driven and meeting by meeting decisions.
• We will see how things evolve.

This comments to the Financial Times here are from yesterday before the big selloff in oil prices. The ECB is now in a wait-and-see mode until September at very least. The most probable month for the next rate cut according to the market pricing is December.