ECB's Rehn Sees Inflation Risks Tilted to Downside in Euro Area

European Central Bank Governing Council member Olli Rehn stated in an interview with Milano Finanza that inflation risks in the euro area are slightly tilted to the downside in the medium term. According to a transcript posted on the Bank of Finland website on December 6, 2025, Rehn cited relatively low energy prices, the appreciation of the euro, and expectations of a slowdown in inflation in services and wages as contributing factors. Rehn emphasized that these factors have led to a more favorable outlook for inflation in the euro area. "Inflation risks in the euro area are slightly tilted to the downside in the medium term," he said. The Finnish central bank governor attributed the positive development to the combination of low energy prices, a stronger euro, and expectations of a slowdown in inflation in services and wages. The European Central Bank has been closely monitoring inflation rates in the euro area, which have been a concern in recent years. In 2023, the ECB implemented a series of interest rate hikes to combat high inflation, which had risen to levels not seen in decades. However, with the global economy facing a slowdown, the ECB has been reassessing its monetary policy stance. Rehn's comments suggest that the ECB may be preparing to adjust its monetary policy in response to the changing economic landscape. While the ECB has not made any official announcements, Rehn's statement indicates that the bank is considering a more dovish stance in the coming months. The implications of Rehn's comments are significant, as they suggest that the ECB may be willing to ease its monetary policy in response to the slowing economy. This could lead to lower interest rates and increased liquidity in the financial markets, which could have a positive impact on economic growth. In a statement, the Bank of Finland said that Rehn's comments were made in his capacity as a member of the ECB's Governing Council and did not reflect the views of the Bank of Finland. The bank emphasized that the ECB's monetary policy decisions are made independently and are based on a thorough analysis of economic data. Rehn's comments have been welcomed by some economists, who see them as a sign that the ECB is willing to adapt to changing economic conditions. "Rehn's comments suggest that the ECB is taking a more nuanced approach to monetary policy," said one economist. "This could lead to a more stable and sustainable economic recovery." The ECB's next policy meeting is scheduled for January 2026, where the bank is expected to announce its decision on interest rates. While Rehn's comments do not provide any clear indication of what the ECB will do, they suggest that the bank is considering a more dovish stance in the coming months. In conclusion, Rehn's comments suggest that the ECB is preparing to adjust its monetary policy in response to the changing economic landscape. While the implications of his comments are significant, they do not provide any clear indication of what the ECB will do. The bank's next policy meeting will provide further clarity on its monetary policy stance.