ECB’s Rehn: Interest Rate Hike Not Yet Around the Corner or Even on the Horizon

27 March 2021

By David Barwick – FRANKFURT (Econostream) – The next interest rate hike by the European Central Bank is still far off and would be preceded by a reduction in asset purchases in the context of gradual policy tightening, Governing Council member Olli Rehn said on Saturday.

In an interview with Finnish daily Helsingin Sanomat, Rehn, who heads the Bank of Finland, said that an interest rate hike ‘is not yet around the corner and is not even on the horizon’.

‘It is often thought that stimulative monetary policy would end like a wall’, he was quoted as saying. ‘There is no such intention.’

Once a foundation for growth is firmly in place and inflation is seen to be recovering, that would be the moment to tighten policy gradually, he said. The first step would be to reduce asset purchases, and then ‘at some point to raise interest rates’, he said.

Asked when the first rate hike could occur, he replied: "I wonder if it will be achieved by my second term as Governor at the Bank of Finland at the latest."

Rehn was appointed to his current and first seven-year term in July 2018.