By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Olli Rehn on Wednesday said that if confidence in the disinflation process increased, the ECB could continue to cut interest rates, thus bolstering growth.  

In a speech at the Bank of Finland’s summer seminar, the text of which was posted on the website of the institution, which he heads, Rehn said, ‘If confidence in the slowing trend of inflation strengthens in the near future, I believe that the easing of monetary policy, i.e. interest rate cuts, can continue. Nor would it be bad for the fragile growth and subdued investment in the euro area economy, especially in industry, which I am concerned about.’ 

The ECB was not committed to any particular interest rate path and would continue to follow its meeting-by-meeting approach, he said.  

There had been significant progress towards the ECB’s inflation target, he said, but there would be fluctuations ahead. 

‘Inflation will continue to slow down, but the road to the 2% target will still be bumpy this year’, he said. 

Market forces had overreacted to the Bank of Japan’s recent interest rate hike, he said, noting that the behaviour was more related to uncertainty than to economic fundamentals.  

‘Central banks do not tend to react to individual market changes’, he said. ‘Nevertheless, we will remain vigilant in terms of developments in the overall economic picture, both in terms of price and financial stability and in terms of growth and employment.’