ECB's Rehn Warns of Growth Risks Backing September Rate Cuts

The European Central Bank's policymaker, Olli Rehn, has indicated that a potential rate cut in September 2024 is on the table due to rising risks to economic growth. With the global economy facing challenges from high energy prices and uncertainties in the political landscape, the ECB is contemplating a softening of its monetary policy.
Rehn emphasized the need for careful analysis of current economic conditions, noting that while there are some positive signs, risks remain elevated. “Slower growth rates, driven by external economic shocks, may hinder the achievements made in the fight against inflation,” he stated.
Given the interest rate hikes in previous years, many analysts have started discussing the necessity of adjusting policy to stimulate economic activity. If a decision to cut rates is made in September, it could send a clear signal that the ECB is ready to respond to changes in economic conditions.
Rehn added that the consequences of increased volatility in financial markets and its impact on real sectors of the economy must also be considered. Thus, in light of the current changes, he believes that a rate cut would be the optimal solution for the coming months.
This statement aligns with some experts' views that the central bank's financial policy should remain flexible to address unexpected changes on the economic front.