French central bank head cautions on oil price impact - newspaper
FRANKFURT (Reuters) - The European Central Bank could extend money printing, the head of France's central bank told a German newspaper on Sunday, as the long-term impact of low oil prices weighs on euro zone economies.
ECB governors from across the euro zone, including France and Germany, will meet in early March to decide whether to adjust interest rates or extend a scheme known as quantitative easing, creating money to buy government bonds in a bid to revive inflation and boost recovery.
Their decision depends largely on whether there is a further fall in flagging price inflation, used by the ECB as a barometer of the euro zone's economic health.
Speaking to German newspaper Frankfurter Allgemeine, Francois Villeroy de Galhau signalled that the impact of low oil prices could be long term.
These comments indicate that oil could dampen already low inflation by, say, reducing wage growth. This would typically require the ECB to act again to shore up the economy.
"Temporary falling oil prices alone are not a sufficient reason," said Villeroy de Galhau. "But if the low energy prices have sustainable long-term effects, we have to act. That seems to be the case, but we will see in March."
He said that it would be possible to buy more than the 60 billion euros ($66 billion) of chiefly bonds it buys each month now. "We are ready to act, but we will have to see the economic data first," he said.
(Reporting By John O'Donnell; Editing by Ros Russell)
