The European Central Bank should move quickly to raise interest rates in order to tackle soaring inflation, according to Finland’s central bank chief.
His comments come as the U.S. Federal Reserve and the Bank of England’s tightening cycle intensifies pressure on the ECB to follow suit.
“We have a conflict in pressures in monetary policy,” Olli Rehn, governor of the Bank of Finland and member of the Governing Council of the ECB, told CNBC’s Silvia Amaro on Friday.
“We are almost in between a rock and a hard place so that on one hand we have to ensure that the recovery will continue. On the other hand, we have to prevent higher inflation expectations being entrenched and being reflected in the labor market,” Rehn said.
“In other words, we have to avoid second-round effects. Therefore, in my view, we should move relatively quickly to zero and continue our gradual process of normalization of monetary policy as we have done,” he continued.
“Of course, all this on the condition that Russia’s war in Ukraine will not substantially escalate and intensify which could derail all the forecasts and the economic recovery.”
Like many central banks around the world, the ECB is seeking to steer the euro zone economy through an inflation surge that has been exacerbated by Russia’s unprovoked onslaught in Ukraine.
This is a breaking news story and will be updated shortly.