ECB's Rehn Warns Against Underestimating Inflation Slowdown Risks

European Central Bank Governing Council Member Olli Rehn expressed concerns that the risk of inflation slowing should not be overlooked, according to a report by Helsingin Sanomat. Speaking in an interview published by the Finnish newspaper on Saturday, Rehn stated that low energy prices, a stronger euro, and easing wage and services inflation pose a risk that total inflation slows excessively relative to the bank's 2% target. Rehn emphasized the importance of monitoring the inflation trend, citing the need to balance the risks of a slowdown in inflation with the potential for a stronger euro to have a positive impact on the economy. "We must account for the risk of slowing inflation, as it could have significant implications for the economy and monetary policy," Rehn said in the interview. The European Central Bank has been closely monitoring inflation trends in the eurozone, which has been experiencing a period of moderate inflation. The bank's 2% inflation target is seen as a key indicator of economic health, and policymakers are keen to ensure that inflation remains within this target range. Rehn's comments suggest that the bank is taking a cautious approach to monetary policy, with a focus on maintaining price stability. In recent months, the eurozone has experienced a decline in energy prices, which has contributed to a slowdown in inflation. Additionally, the stronger euro has made imports cheaper, further contributing to the decline in inflation. Rehn's comments highlight the need for policymakers to carefully balance the risks and benefits of a stronger euro, particularly in terms of its impact on inflation. The European Central Bank has been using a range of tools to monitor and influence inflation trends, including interest rates and quantitative easing. Rehn's comments suggest that the bank may need to consider further measures to support the economy and maintain price stability. However, the bank is likely to take a cautious approach, given the uncertainty surrounding the economic outlook. In conclusion, Rehn's comments highlight the importance of monitoring inflation trends and the need for policymakers to carefully balance the risks and benefits of a stronger euro. The European Central Bank will continue to closely monitor inflation trends and adjust monetary policy as necessary to maintain price stability and support economic growth.