European Central Bank policymaker Olli Rehn said he sees few signs that inflation in the eurozone is becoming entrenched, a view that could influence the pace of future interest-rate increases.
Rehn's assessment
Rehn, who serves as governor of the Bank of Finland and sits on the ECB's Governing Council, made the remarks in a recent statement. He said there is limited evidence that price pressures are becoming embedded in the economy, suggesting the central bank may not need to raise rates as aggressively as some have feared.
What entrenched inflation means
Central banks worry about entrenched inflation when price increases start to feed into wages and expectations, making them harder to reverse. Rehn's comments indicate he believes the eurozone has not reached that point, despite elevated headline inflation figures.
The ECB has been raising borrowing costs to combat inflation that peaked above 10% in late 2022. But with the economy slowing, officials are debating how much further to go. Rehn's assessment adds a cautious note to that discussion.
His remarks also come as the ECB prepares to release new economic projections ahead of its next policy meeting. Those forecasts will help determine whether the central bank continues its tightening cycle or pauses.
