(Bloomberg) — The European Central Bank should continue lowering borrowing costs irrespective of what the US Federal Reserve does, according to Governing Council member Olli Rehn.
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“Against the backdrop of disinflation being on track and the growth outlook having weakened it makes sense to continue rate cuts,” the Finnish official told Bloomberg TV. “The direction is clear, the scale and speed of rate cuts depends upon the incoming data.”
Speaking in an interview in Hong Kong, Rehn said that the ECB “is not the 13th federal district of the Federal Reserve System, we take decisions on the basis of our mandate, which is price stability in the euro area.”
The ECB is less than three weeks away from what economists and investors reckon will be another cut in interest rates, with economists predicting three more moves after that. Meanwhile, the US central bank is taking a go-slow approach to further reductions.
“We are likely to leave the restrictive territory sometime in the spring-winter, which in my country can mean anything between January and June,” Rehn said, echoing earlier comments. “I would say at the latest by midsummer we should have left restrictive territory.”
Despite inflation advancing for a third month in December, officials expect it to ease back to the 2% target during 2025. They’re likely to continue loosening monetary policy, particularly as the region’s economy struggles. That should provide a welcome lift for businesses and consumers whose confidence has been eroded by political upheaval in the euro zone’s two biggest members, Germany and France, as well as the upcoming return of Donald Trump as US president.
Amid all that uncertainty, an economic sentiment gauge calculated by the European Commission slid to its lowest since 2023 in December. Data this week are likely to show Germany endured a second straight year of contraction in 2024.
Earlier on Monday, Chief Economist Philip Lane said the ECB is likely to reduce rates further in order to ensure it delivers on its price stability mandate and helps the economy growing.
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