European Central Bank Governing Council member Olli Rehn warned that the risk of inflation slowing too sharply should not be dismissed, urging caution as policymakers weigh whether another rate cut in December is warranted. In an interview with Helsingin Sanomat, Rehn said weaker energy prices, a firmer euro and moderating wage and services inflation could push headline inflation below the ECB’s 2% goal:
- acknowledged that upside risks to inflation still exist
- noted that the euro-area economy continues to hold up despite disruptions from the Trump administration’s tariff policies
- growth remains slow but persistent
- flagged vulnerabilities in financial markets, warning that equity valuations look stretched and increasingly exposed to a correction
- pointed specifically to the AI-driven surge in US tech stocks, saying prices appear elevated relative to the underlying economic landscape and corporate earnings
- need for strong bank buffers and a vigilant policy stance
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Rehn’s comments lean mildly dovish on inflation but cautious on markets, suggesting the ECB may keep a steady hand in December while watching for equity-driven financial-stability risks.
