ECB’s Rehn: Shouldn’t Underestimate Risk of Inflation Becoming Too Low

15 November 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Olli Rehn on Saturday said that there remained a risk of euro area inflation again becoming too low.

In an interview with Finnish daily Helsingin Sanomat, Rehn, who heads the Bank of Finland, said, “The risks to inflation are two-sided, i.e., upside and downside. Cheap energy prices, a stronger euro, and subdued wage and services inflation create a risk that headline inflation will slow down unnecessarily compared to our 2% target. This downside risk should not be underestimated.”

However, overall, “the European economy has withstood the tariff shock better than was predicted at the beginning of the year,” he noted, adding that the area had “continued its tenacious growth and demonstrated its resilience.”

Rehn sounded another note of caution regarding high valuations on equity markets.

“There is a clear risk of a correction in the stock market. That is why it is important that strong capital buffers for banks in Europe have been maintained,” he said.

“The value of stocks is now quite high in relation to the development of the real economy and corporate results due to the artificial intelligence boom in the United States,” he elaborated. “For these reasons, it is now time to be cautious.”

Turning to his candidacy for vice president of the ECB, Rehn said, “I have received contacts from all over Europe encouraging me to apply for the position. These contacts have referred to my long experience in monetary policy, financial stability and European decision-making.”