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ECB can adjust pace of cuts if Mideast tensions flare, Villeroy says

The Paris Europlace International Financial Forum in Paris

NEW YORK (Reuters) - The European Central Bank will be in a position to adapt the pace of rate cuts if the fallout from Middle East tensions has a lasting impact on energy prices and inflation, ECB policymaker Francois Villeroy de Galhau said on Tuesday.

The ECB has opened the door to a first rate cut in June as inflation eases back towards its 2% target and financial markets expect three rate cuts over the course of this year.

Villeroy, who is also governor of the French central bank, said after the first rate cut is delivered "barring shocks or surprises" in June, the pace of further moves would be guided by the flow of economic data and decided strictly on a meeting-by-meeting basis.

"That said, we will monitor closely the geopolitical developments in the Middle East, and their possible spillovers on energy prices," Villeroy told an event at the Economic Club of New York.

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"If ever these consequences happened to be lasting and propagating – i.e. affecting underlying inflation – we would have ample room to adjust the pace and the destination, if needed, in the incoming monetary path after the first rate cut."

(Reporting by Michael Derby; writing by Leigh Thomas; Editing by Benoit van Overstraeten and Jonathan Oatis)