ECB’s Rehn: Markets Expect ‘Slightly’ More Easing, We Are ‘Ready to React’

25 July 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Olli Rehn said on Friday that financial markets anticipate further easing and that the ECB remains ready to act if needed,

In a written statement published on the website of the Bank of Finland, which he heads, Rehn said that tariffs and uncertainty were impacting Eurozone economic growth.

‘On the positive side, euro area inflation is now at 2%, the level we aim for over the medium term’, he said.

Core inflation and other inflation measurements about longer-term expectations suggested inflation was ‘close to the ECB’s 2% target’, he said.

The expected downside deviation of inflation in 2026 was to be temporary but would be monitored by the ECB ‘particularly closely’, according to Rehn.

‘So the inflation situation is good right now, but vigilance is required in the future to ensure it stays on target’, he said. ‘We are fully committed to this.’

Rehn said he was ‘increasingly concerned’ about growth and described some of the factors that have driven better-than-expected GDP data as ‘temporary.’

In September, when the ECB will make its next decision on interest rates, there would be new information about the temporary nature of growth in the earlier part of the year, he said.

‘Allowing extra time for decision-making is particularly useful now – the option value of waiting is exceptionally high’, he added.

Risks to growth were to remain on the downside if Trump were to maintain tariffs at the level reported at the end of this week, according to Rehn, who said this level was already expected.

‘They would significantly weaken eurozone growth, further dampening inflation’, he added.

The Governing Council did not have an ‘urgent need’ to move interest rates and ‘took a break from policymaking, maintaining full freedom of action and awaiting the final (?) balance of the EU-US trade negotiations, additional data on economic developments in the first half of the year and the ECB's new comprehensive forecast package’, he said.

Rehn noted that markets were expecting more slightly more easing than currently and said the ECB would monitor inflation and growth and would stand ‘ready to react if the situation requires it.’