ECB policymaker Rehn stresses energy shocks must not dictate monetary policy unless they fuel broader inflation pressures.
European Central Bank policymaker Olli Rehn stated that monetary policy should not be driven solely by oil price fluctuations, even as Middle East tensions raise supply concerns. He emphasized the need to assess whether energy shocks translate into sustained inflation via wages or expectations, rather than reacting to short-term volatility.
Rehn noted the current energy shock differs from 2022’s crisis, with market-based inflation expectations still anchored near the ECB’s 2% target. Wage growth has remained contained, but the bank is monitoring risks of a broader pass-through. He warned against repeating 2011’s policy missteps, when premature rate hikes were reversed as growth weakened.
The ECB remains committed to stabilizing inflation over the medium term, balancing stagflationary risks against the need for measured policy responses. The duration and strength of the energy shock will guide future decisions, Rehn added.