ECB’s Rehn: Interest Rate Cut to Support Economic Recovery

7 June 2024

By Aurėja Bobelytė – VILNIUS (Econostream) – European Central Bank Governing Council member Olli Rehn on Friday said that the reduction in the ECB’s key interest rates would support the economic recovery.

In a blog post on the website of the Bank of Finland, which he heads, Rehn said, ‘Yesterday, we were able to send positive news about the economy from Frankfurt for a change: the severe inflationary pressure has subsided, and the interest rate cut also supports the recovery of growth’.

The Governing Council constantly assessed the degree of constraint, and the concerns about monetary policy slowing economic growth had diminished slightly, he said.

‘The ECB's primary task is to ensure that stronger demand does not jeopardise the return of inflation to its 2% target’, he said. ‘On the other hand, we must also avoid a monetary policy stance that would unnecessarily delay the closing of the negative output gap, without jeopardising our primary objective of price stability.’

In a scenario without major economic shocks, the possible scale of interest rate cuts over the medium term could be just under one to two percentage points, he said, noting that it was not a short-term policy goal, but rather ‘a rough idea of the possible scale of interest rate cuts in the coming years.’

‘We decide on monetary policy based on the inflation outlook, core inflation dynamics and monetary policy transmission – at every monetary policy meeting. We are not committed to any interest rate in advance’, he said.