European Central Bank Governing Council member Rehn: Reasons for a rate cut in December are increasing, and policy will continue to be eased in the coming months
European Central Bank Governing Council member Lane stated that the policy will continue to be eased in the coming months, with increasing reasons for a rate cut in December. Inflation in the Eurozone has slowed to the 2% target, economic growth is weak, and a 25 basis point rate cut is expected next week, bringing the deposit rate to 3%. Lane pointed out that the rise in service sector inflation is related to wage growth, a return to zero interest rates is unlikely, and there are unconventional monetary policy tools available. He also mentioned that the EU needs to actively address the risks in trade relations with the United States
According to Zhitong Finance, Olli Rehn, a member of the European Central Bank's Governing Council and Governor of the Bank of Finland, stated that the European Central Bank will continue to ease its policy in the coming months. Rehn noted that inflation in the Eurozone has slowed to the 2% target, and economic growth is also very weak; these factors increase the rationale for lowering the benchmark interest rate in December, and this direction of monetary policy will continue in the coming months. However, Rehn declined to specify whether he supports a 25 basis point or 50 basis point rate cut in the decision on December 11-12. He said, "It is important to always retain some flexibility, even if there is a well-founded communication regarding the direction."
It is widely expected that the European Central Bank will cut interest rates by 25 basis points next week. This will be the fourth rate cut in this round of easing and will bring the deposit rate to 3%. Due to geopolitical uncertainties putting pressure on the outlook, the subsequent path of interest rates remains unclear.
Rehn also mentioned that inflation in the services sector is rising somewhat too quickly, mainly due to relatively rapid wage growth. According to current data, a return to zero interest rates is "unlikely," and if inflation slows excessively, the European Central Bank has unconventional monetary policy tools available.
Rehn pointed out, "The neutral interest rate will be around 2.5%, and it is 'likely' to reach this level by the end of winter—in Finland, this could mean anytime between January and June."
Rehn added that given the "obvious" risks of weakening trade relations between the EU and the US, the EU needs to engage in proactive strategic thinking regarding its trade relationship with the US; the EU should be prepared for tariffs imposed by the US and also for tariffs imposed by the US on China