ECB is ready to use all necessary tools to increase inflation, says Rehn

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(Bloomberg) – The European Central Bank is ready to use whatever tools it needs to stimulate inflation and is closely monitoring the appreciation of the euro, said Olli Rehn, member of the Governing Council.

“We are certainly ready to use and adjust all of our instruments as appropriate,” the Finnish governor said in an interview with Bloomberg Television. “We are closely monitoring the development of the exchange rate, in particular with regard to the outlook for inflation.”

Rehn noted that several of his colleagues on the Board of Governors, including Dutch Governor Klaas Knot, have recently raised the possibility of cutting interest rates.

Read more: ECB officials agree to counter investor skepticism to cut rates

The ECB added to its pandemic stimulus plan as recently as December, and while President Christine Lagarde has argued that the eurozone’s recovery remains on track, a slow rollout of vaccinations and lockdowns in courses add to the uncertainty.

Rehn described the region’s inflation outlook as “too low for my liking and, most importantly, too low for our purpose.”

Inflation in the euro area is currently -0.3%, against a medium-term target of just under 2%. The surge in the exchange rate over the past year is one of the factors that have driven prices down, in part lowering import costs.

Read more: ECB studies differences with Fed policy boosting euro

“I wouldn’t go into speculation on either instrument of our monetary toolkit,” Rehn said. “I would just say that we are indeed ready to use and adjust all of our instruments as appropriate.”

Rehn also stressed that the change in the ECB’s inflation target should be replaced by a clear and symmetrical target of 2%. He has previously argued that such a change would help revive expectations after years in which inflation has remained stubbornly too low despite billions of euros in monetary stimulus.

© 2021 Bloomberg L.P.

© Bloomberg. Olli rehn

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