European Central Bank policymaker Rehn has reiterated the ECB’s commitment to maintaining full optionality on interest rates and emphasised a meeting-by-meeting approach to policy decisions. While downside risks to inflation currently take slight precedence, upside risks remain present, indicating a balanced outlook.

Rehn also dismissed the idea of pre-emptive easing as a form of insurance against economic downturns, signalling the ECB’s readiness to remain cautious. Inflation expectations are firmly anchored around the 2% target, supporting the central bank’s neutral stance.

All ECB policymakers now appear aligned in this neutral approach, consistently stating they will not react to minor or short-term deviations from the inflation target. Rehn further warned that any loss of independence by the US Federal Reserve would likely have repercussions for ECB policy as well.

This stance underlines the ECB’s intention to keep policy flexible and data-dependent, avoiding premature moves in either direction.

Original Source: Giuseppe Dellamotta of investinglive.com