He estimates that Europe is currently trying to avoid repeating the mistakes it made after the last financial crisis. The ECB was then reacting to rising energy prices by raising its interest rates, unlike the US Federal Reserve.
Rehn, a member of the Governing Council, said the monetary authority would not resort to raising interest rates until the end of this year.
“If the Russian attack does not cause a major slave winter for the European economy, we will continue to gradually normalize monetary policy. So an increase in interest rates can be expected either at the end of this year or at the beginning of next year, ”he comments to the broadcaster.
Helsingin Sanomat on Sunday highlighted that Euribor rates have already risen markedly due to accelerating inflation and expectations of a return to tighter monetary policy. Increases in shorter interest rates have been relatively modest, but the 12-month interest rate, Finland’s most common reference rate for mortgages, has crept by 0.2 percentage points to -0.2 since the beginning of February.
The pace picked up again a couple of weeks ago, according to preliminary statistics, with inflation in the euro area rising to 5.8% in February. Sanctions imposed on Russia as a result of Ukraine’s invasion are expected to further accelerate inflation by raising energy and commodity prices.
The primary objective of the ECB is to maintain price stability by keeping inflation at around 2% over the medium term.
Monetary authority announced almost two weeks ago it will close its purchases of assets, which are a key part of its recent recovery-oriented policy, ahead of schedule in the third quarter, reflecting its concerns about inflation.
Aleksi Teivainen – HT
Source: The Nordic Page