ECB’s Rehn: Risk of Cutting Prematurely ‘Substantially Decreased’; ECB Not a Regional US Fed Bank

8 March 2024

By David Barwick – FRANKFURT (Econostream) – The risk that a European Central Bank rate cut would turn out to have been too early is now significantly lower, Governing Council member Olli Rehn said on Friday.

In a blog post on the website of the Bank of Finland, which he heads, Rehn said his view was that ‘based on the forecast that has now been received, the risks of premature interest rate cuts in terms of inflation control have substantially decreased.’

‘This is also affected by the lowering of the growth forecast’, he added.

The ECB would reconsider the subject of policy easing in April and June, he said.

Rehn objected to the idea that the ECB would have to wait for the US Federal Reserve to cut rates first.

‘Rumours about this are greatly exaggerated: the ECB is not the Fed's "13th Federal District", i.e. one regional central bank’, he said. ‘The growth and inflation trends in Europe and the United States are currently so different that different paces in monetary policy are also justified.’

Assessing labour market tightness was an important part of deciding whether the inflation outlook permitted looser monetary policy, he said, as wage growth was behind relatively high service sector inflation.