By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Olli Rehn on Monday said there was a strong case for the ECB to cut interest rates in the September meeting, given downside risks to growth in the euro area. 

Speaking at an event organised by the European American Chamber of Commerce New York in collaboration with the Consulate General of Finland in New York City, Rehn, who heads the Bank of Finland, said, according to a text provided, ‘Without pre-committing to any specific interest rate path, let me add that, in my view, the recent increase in negative growth risks in the euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September – provided that disinflation is indeed on track.’ 

The ECB would continue to look at a ‘wide range of data, analysis and forecasts’ when making decisions and would be able to continue to cut interest rates if confidence in disinflation became ‘more robust’, he said.  

‘Inflation in the euro area has been falling, but the road ahead to the ECB’s 2% medium-term goal is still likely to be bumpy this year’, he noted.  

The ECB’s symmetric 2% inflation target had been working well and did not need to be changed in the strategy review, he said.  

‘[T]he inflation target itself does not, in my view, need re-consideration’, he said. ‘But we need to analyse the inflation dynamics of the recent years – and the functioning of the strategy – in more depth.’ 

The lack of industrial competitiveness in Europe – especially when compared to the United States – was an ‘immediate concern’, which could be addressed by strengthening productivity, he said.  

‘Policies aimed at improving access to finance, such as further progress with the capital markets union, and the removal of existing barriers to the provision of cross-border services could have a long-lasting impact in supporting productivity growth in the euro area’, he said.