ECB’s Rehn: Defense Spending Boost Will Not Necessarily Slow Down Rate Cuts

11 March 2025

ECB’s Rehn: Defense Spending Boost Will Not Necessarily Slow Down Rate Cuts
Olli Rehn, governor of the Bank of Finland, at the European Central Bank Forum on Central Banking in Sintra, Portugal on July 2, 2024. Photo by the ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Olli Rehn said on Tuesday that an increase in defense spending would not necessarily slow down interest rate cuts.

In a press conference on the economic outlook and monetary policy at the Bank of Finland, which he heads, Rehn said that the ECB ‘will maintain complete freedom of action’ amid high uncertainty and a ramp-up in defense spending.

‘It will depend on the overall impact of defense spending and other factors, which will occur in parallel within the same timeframe’, he said.

The ECB would not precommit and would stick to a meeting-by-meeting approach, he said.

‘We always do a comprehensive assessment based on incoming data and we look at, first, the inflation outlook, we look at core inflation or underlying inflation neutralised from energy and food prices and we look at the strength of monetary policy transmission’, he said.

The Bank of Finland expected US tariffs on European and Chinese goods to hit the economy by more than 0.5% of GDP in 2025 and in 2025, according to Rehn.

 

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