ECB’s Rehn sees euro area inflation stabilising at 2% during 2025

HELSINKI (Reuters) – The euro area inflation rate will stabilise at the European Central Bank’s 2% target during the course of 2025, Finnish ECB policymaker Olli Rehn said in a speech on Tuesday.

“The direction of monetary policy is clear: interest rate cuts have begun and our monetary policy stance is becoming less restrictive,” Rehn said.

The ECB’s governing council would decide on the pace and scale of further rate cuts on a meeting-by-meeting basis, he added.

Rehn heads the Bank of Finland which warned the soft landing seen ahead for the euro area economy could still turn into a recession if multiple negative growth risks were to materialise simultaneously.

Europe must find ways to boost productivity, as the increase in European energy costs, stemming from Russia’s invasion of Ukraine, has dented industrial output in the region, Rehn said.

“If significant reforms cannot be achieved, a more permanent weakening in manufacturing would threaten the euro area’s competitiveness,” he added.