European Central Bank (ECB) policymaker Olli Rehn has indicated that a rate hike at the central bank’s upcoming policy meeting on April 30 is “not self-evident.” Speaking on Tuesday, the Bank of Finland governor highlighted that the ECB is closely monitoring the conflict in the Middle East and its potential spillover effects on the broader European economy. This cautious stance comes as headline inflation is expected to rise this year, adding complexity to the central bank’s monetary policy decisions.
While a rise in headline inflation for the current year is deemed unavoidable, Rehn noted that the medium-term impact of the ongoing conflict on inflation remains unclear. “A rate hike is not self-evident, but we have to proceed by keeping calm and closely analysing the effects of the war in Iran and the closure of Strait of Hormuz on the economy,” he told reporters when questioned about the next rate meeting. The varying intensity of the conflict’s economic repercussions across individual euro area countries also presents a challenge for uniform policy application.
Rehn further explained that the impact on the Finnish economy, for instance, has been moderated due to the nation’s more rapid progress in energy transition compared to many other European countries. He underscored that the Middle East conflict powerfully illustrates the critical importance of Europe’s green energy transition for fostering resilience and maintaining competitiveness. Rehn warned against any deceleration in these efforts, stating, “Slowing the green transition now would be a serious mistake.”
