ECB’s Rehn Underscores Value of Persistence in Monetary Policy

30 September 2025

By David Barwick – HELSINKI (Econostream) – European Central Bank Governing Council member Olli Rehn on Tuesday highlighted the potential effectiveness of monetary policy persistence.

In a speech at the annual conference of the Bank of Finland, which he heads, Rehn observed that the ECB had been in line with its updated strategy by acting forcefully during the hiking cycle and then demonstrating persistence by signaling that rates would remain high as long as needed.

“More generally, a forceful policy response to significant deviations from target enables to keep inflation expectations firmly anchored,” he said. “Even so, there may come a point where persistence — relying on clear communication and guidance rather than further rate hikes — can become a more effective approach.”

Bank of Finland research indicated that persistence in monetary policy pays off in the sense of enabling a lower sacrifice ratio, he said.

The outcome of the ECB’s most recent strategy assessment with no change to the price stability definition could be characterized by the expression “if it ain’t broke, don’t fix it,” he suggested.

“The clarity of the point target has helped to anchor inflation expectations and contribute to clear communication,” he said.

As well, the medium-term orientation, similarly preserved, “allows for temporary deviations from the 2% inflation target and thus gives monetary policy flexibility to ‘look through,’ if inflation varies e.g. due to temporary supply shocks,” he said.

The global monetary system was “under pressure from both geopolitical confrontation and technological disruption,” but Europe also had “a great opportunity to make the euro a trusted global anchor of stability,” he said.

“This calls for a strategic rethink and bold action, so that it can support a healthier rebalancing of the global monetary order,” he said.