MNI BRIEF: ECB Peak Rate Likely in Summer - BoF's Rehn

The ECB will raise key interest rates by 50bps in March, with further hikes likely into the summer, then hold them at a sufficiently restrictive level “for some time,” Bank of Finland governor Olli Rehn said in an interview with Boersen-Zeitung published Monday.

However, Europe’s positive growth prospects need not keep inflation high or make it more persistent than previously expected, he added. Rising wages need to be monitored, but Rehn said recent negotiated wage settlements in Finland and Germany, where pay rises are expected to fall in 2024, offered grounds for reassurance. “As far as inflation in the euro area over the past two years is concerned, there was one main driver and one anchor. The inflation driver was the very high energy prices.

“As things stand, I assume that we will reach the terminal rate in the course of the summer,” he said, with further rate hikes beyond March “likely, logical and appropriate [...] it is important that we reach the restrictive level and then stay at that level for some time [...] I would say we are about to reach the restrictive level soon.”