By Yoruk Bahceli and Marc Jones

LONDON (Reuters) – The European Central Bank (ECB) needs to be more agile with its interest rate policy following the Israel-Iran air war, according to France’s central bank governor, Francois Villeroy de Galhau, stated on Tuesday.

Villeroy indicated that the ECB is currently “in a good position” after cutting interest rates to 2% this month, though uncertainty is growing as the Middle East conflict has already driven oil prices up sharply.

“Underlying inflation, is it affected or not by the spillovers of the commodities prices, the oil price?” Villeroy stated during the Financial Times’ Global Borrowers & Bond Investors Forum in London.

The ECB needs “agile pragmatism more than ever,” he emphasized. Villeroy also highlighted the necessity of considering the euro’s recent appreciation in their monetary policy decisions.

“We should incorporate this analysis of the exchange rate in our monetary policy decision,” he remarked.

The euro has gained over 10% this year and more than one percentage point this month alone. Villeroy expressed full support for ECB chief Christine Lagarde’s calls to strengthen the global role of the euro as a viable alternative to the dollar.

“If the euro has to attract all international investors, we need a deeper, more liquid, more integrated financial market in Europe,” he said.

Villeroy concluded that member states need a “common calendar” for implementing former ECB chief Mario Draghi’s recommendations to enhance the region’s competitiveness.