Today’s News
The European Central Bank (ECB) may need to consider another rate cut in September due to ongoing economic weakness, according to Finnish central bank chief Olli Rehn.
Image Source: Bloomberg
Speaking on Monday, Rehn highlighted the growing risks to economic growth in the euro area, suggesting that a rate reduction at the ECB’s upcoming meeting on September 12 could be necessary if disinflation continues as expected.
The ECB, which initiated a rate cut in June following a series of record hikes, opted to keep rates steady in July without providing clear guidance on future decisions. Rehn, a member of the ECB’s 26-member Governing Council, is among the first to express a perspective on the potential need for further rate cuts, citing the “recent increase in negative growth risks” as a key factor.
Image Source: China Daily
Market analysts currently predict a 90% likelihood of a 25 basis point cut in the deposit rate to 3.5% in September, with expectations for at least one additional reduction by the year’s end.
Rehn also addressed concerns about the euro zone’s economic outlook, noting that the anticipated recovery in the region’s economy is not guaranteed and that policymakers should be ready for various scenarios.
“The recent increase in negative growth risks in the euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September, provided that disinflation is indeed on track,” Rehn stated during a speech to the European American Chamber of Commerce in New York.
While Rehn expressed optimism about inflation trends, he cautioned that achieving the ECB’s 2% inflation target could be challenging. He emphasized that although significant progress has been made, the path to reaching the ECB’s goal is likely to remain uneven. “The road ahead to the ECB’s 2% medium-term goal is still likely to be bumpy this year,” Rehn added.
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