ECB’s Rehn: Fed Rate Cut ‘Not a Surprise’, Market Reactions ‘Relatively Small’

20 September 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Olli Rehn on Friday indicated that the US Federal Reserve’s decision this week to start cutting interest rates with a 50bp move had not led to significant reactions in terms of exchange rates or rate expectations.

In an interview with Finnish business daily Kauppalehti, Rehn, who heads the Bank of Finland, said that the rate cut ‘was not a surprise. It was known all along that the direction was clear, there were different ideas about the scale of the interest rate cut.’

‘As far as I can tell, the market knew how to expect the decline and its magnitude, and the market reactions have been relatively small both in terms of currencies and interest rate expectations’, he said.

The rate cut ‘prevents a recession and supports growth and thereby the development of the euro area economy’, he said.

As for monetary policy in the euro area, the direction was ‘clear’ and it would be loosened at a pace and to an extent that hinged on data, he said.

The ECB had made ‘good progress’ toward restoring price stability, he said.

Rehn highlighted the ECB’s identification of downside risks to growth, which helped motivate the ECB’s decision to cut rates again last week, he said.