Inflation warrants rapid ECB normalization, says Rehn

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FRANKFURT (Reuters) – Russia’s war in Ukraine is fueling inflation and therefore justifies the European Central Bank’s (ECB) decision to speed up the end of its exceptional support measures, Olli Rehn said on Tuesday. one of the members of the Board of Governors of the institution.

“With inflation rising rapidly, there are good reasons to hasten the normalization of monetary policy,” he said in a statement.

The ECB announced on June 9 its intention to adopt a first interest rate hike in July and does not rule out that the second, already planned for September, could be more significant, in order to curb inflation. , which reached 8.1% last month in the euro zone.

While the impact of soaring energy prices is set to dissipate over time, inflation has started to spread to other categories of goods and to services, raising fears of its long-term entrenchment at a high level.

“The fallout from Russia’s brutal war is being felt around the world and people have to pay higher prices for energy and food,” Olli Rehn said.

On Monday, ECB Chief Economist Philip Lane said record high inflation risked fueling an “inflationary psychosis”, a phenomenon that leads consumers and businesses to change their spending habits. expenditure based on price hike expectations.

“We are currently seeing very high rates of inflation and it is clear that we could find ourselves in a world in which inflationary psychosis is taking hold,” he said at a dinner hosted by the Society of Professionals. British Economists.

He added that a quarter-point rate hike in July was a given, but the size of the expected hike in September was yet to be determined.

(Report Balazs Koranyi, with David Milliken in London, French version Marc Angrand, edited by Kate Entringer)

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