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The ECB last week walked back on a pledge not to raise rates in
2022 and policymakers are now looking at how to start unwinding
stimulus that has kept the euro zone afloat for years.
"In an uncertain situation - I also refer to the remaining
geopolitical tension and its possible implications on energy
prices and growth - it is better to watch than be sorry as the
old saying goes, or to progress gradually and step by step in
normalising the monetary policy," Rehn said in Helsinki.
Rehn echoed the words
https://www.reuters.com/world/
europe/euro-zone-inflation-could-subside-before-becoming-entrenched-lagarde-2022-02-07
of the ECB's President Christine Lagarde who on Monday said that
any adjustment to monetary policy would be gradual.
Speaking at an event he organised to mark two decades of common
currency in the euro zone, Rehn highlighted the euro's
importance in strengthening unity within the European Union amid
geopolitical turmoil that causes energy prices to rise and
inflation to speed up.
Rehn said the ECB board had estimated there was a risk oaf
inflation speeding up faster than expected.
"The ECB board works with all its tools to ensure that inflation
will stabilize at its 2% target on medium term," Rehn said.
However, Rehn reminded that energy prices were out of monetary
policy's scope of influence.
He said he believed energy prices would remain at a high level
for a number of reasons, including low reserves and the need to
replenish them after high demand caused by the cold season will
subside in Europe.
The ECB board is closely watching wage inflation in Europe, in
order to define the right moment for its rate hike, Rehn said.
When comparing the ECB's policy decisions with those of the U.S.
Federal Reserve, he said it was worth noting that amid pandemic
recovery wages have risen 5% to 10% in the United States and
only around 2.5% in Europe on average.
"It's good to keep in mind the rate hikes back in 2008 and 2011
that stifled growth too early," he said.
(Reporting by Anne Kauranen; Editing by Catherine Evans and Toby
Chopra)
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