The European Central Bank is close to reaching a policy stance that constrains the economy and will likely be done raising interest rates this summer, Governing Council member Olli Rehn told Boersen-Zeitung in an interview.
(Bloomberg) — The European Central Bank is close to reaching a policy stance that constrains the economy and will likely be done raising interest rates this summer, Governing Council member Olli Rehn told Boersen-Zeitung in an interview.
While underlying price pressures are showing some signs of stabilizing, inflation rates remain “excessively high” and warrant further hikes to ensure expectations remain anchored at the ECB’s 2% goal, Rehn, who also heads the Finnish central bank, told the German newspaper in an interview.
“With inflation so high, further rate hikes beyond March seem likely, logical and appropriate,” he said. “I assume that we will reach the terminal rate in the course of the summer.”
Rehn argued that the euro-zone economy will likely avoid a recession, with growth around 1% this year now appearing “realistic.” He noted that wage growth has picked up though mainly reflects compensation for past losses rather than higher inflation expectations ahead.
“I don’t see a profound wage-price spiral so far,” he was quoted as saying. “But we have to be mindful and monitor the wage development very closely. It is crucial that wages only rise so much that the competitiveness of the economy is maintained and that a wage-price spiral is avoided. Otherwise we might have to act more forcefully if necessary.”
The ECB won’t exaggerate its response, he said, “but we should also not rush to start discussing interest-rate cuts.”
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