ECB’s Rehn: Great Uncertainty Is Restraining Economic Activity

22 April 2025

ECB’s Rehn: Great Uncertainty Is Restraining Economic Activity
Olli Rehn, governor of the Bank of Finland, at the 8th ESRB annual conference in Frankfurt on September 27, 2024. Photo by Adrian Petty/ECB under CC BY-NC-ND 2.0.

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Olli Rehn on Tuesday said that the uncertainty over US trade policy was dampening euro area economic growth.

In a speech at the mid-term meeting of the Finnish government, Rehn, who heads the Bank of Finland, said that ‘the trade war initiated by President Trump has created extraordinary uncertainty, which is also holding back economic growth in the Eurozone.’

Moreover, Trump’s attacks on the US Federal Reserve were ‘undermining market confidence’, he said.

The inflationary impact of tariffs was ‘mixed’, he said, raising prices in the US but not necessarily in Europe, where the hit to growth counteracted the direct effect of tariffs on inflation.

‘Most economists also assumed that the euro would weaken as a result of the US tariffs’, he observed. ‘This has not happened, quite the opposite.’

‘If China diverts its exports to Europe due to the extremely high US tariffs, if energy prices fall and if the euro strengthens, the tariffs will not accelerate inflation in the euro area’, he said. ‘However, the overall impact on inflation in the euro area will be moderate, and at least downward in the short term.’