ECB’s Rehn: No Pre-Commitment; Rate Decisions Data-Dependent, Meeting by Meeting

13 September 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Olli Rehn on Friday said that high uncertainty justified the ECB’s approach to setting monetary policy, so that the interest rate path ahead was not foreordained.

In a speech at a joint conference of CEPR and the Bank of Finland, which he heads, Rehn said that there had been ‘good reasons’ for Thursday’s rate cut, pointing to ongoing disinflation, low inflation expectations, ‘subdued’ economic activity and still-restrictive financing conditions.

‘The prevailing uncertainties continue to underline the case for data dependency and a meeting-by-meeting approach in the Governing Council’s decision-making going forward’, he said. ‘We are not pre-committing to a particular rate path.’

The ECB retained complete freedom and flexibility with respect to future decisions, he said. Those decisions would continue to be based on the inflation outlook, underlying inflation and policy transmission, he said.

High wage growth and lower inflation were supporting real disposable incomes and setting the stage for a consumption-led recovery, but low investment remained the euro area’s ‘Achilles’ heel’, he said.

‘[E]ven though the euro area’s longer term growth and competitiveness challenges cannot be solved using monetary policy, an easing in financial conditions will bring welcome relief to households and companies in the short term, and should support investment, which is needed to increase longer-term productivity’, he said.