ECB‘s Rehn: Can Cut Rates in June if Confidence in Inflation Path Continues to Grow

15 May 2024

By Aurėja Bobelytė – VILNIUS (Econostream) – Interest rates could be cut in June if confidence in the sustainability of disinflation towards 2% kept increasing, European Central Bank Governing Council member Olli Rehn said Wednesday.

In a speech at the 17th Bank of Finland’s Payment Forum, the text of which was posted on the website of the Bank of Finland, which he heads, Rehn said, ‘At the ECB Governing Council meeting in April, we gave a conditional signal about interest rate cuts in June. If confidence that inflation is approaching its target in a sustainable manner continues to strengthen, monetary policy can be loosened’.

The ECB’s decisions would continue to be based on the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, he said.

According to Rehn, economic recovery in the euro area was foreseeable in the second half of 2024.

‘Signs of a turnaround can be seen especially in the predictive indicators of service industries’, he said.

Weaker economic development due to geopolitical risks should not be dismissed, as the conflicts in the Middle East and Ukraine continued to fuel uncertainty, he noted.

‘Geopolitics can therefore derail the positive development of the economy, even though the market atmosphere is now quite calm - perhaps too calm’, Rehn said.