By Marta Vilar – BANGKOK (Econostream) – European Central Bank Governing Council member Olli Rehn said on Saturday that higher borrowing costs were tightening financial conditions, weighing on economic growth and exerting some disinflationary pressure.

Speaking at a symposium organized by OMFIF and DZ Bank in Bangkok, Rehn, who heads the Bank of Finland, pointed to stronger demand for capital from both the private and public sectors as a factor behind higher market interest rates.

Rehn said private-sector demand for capital had increased, particularly as a result of the artificial intelligence investment boom, which was increasingly being financed through debt and leverage rather than solely through companies’ cash flows.

At the same time, many advanced economies, including the US, were running very large fiscal deficits, adding to demand for capital, he noted.

“This is having an impact on the economic environment, tighter financial policy,” he said. “This is affecting growth and having some disinflation.”

He also reiterated that the ECB’s primary mandate was to ensure price stability.