The European Central Bank (ECB) will continue to ease monetary policy in the coming months, according to ECB Governing Council member and head of the Bank of Finland, Olli Rehn.
Inflation in the eurozone has slowed to the target of 2%, while economic growth in the currency area remains unstable, Rehn stated in an interview with Helsingin Sanomat.
"These factors provide grounds for a rate cut in December, and this direction of monetary policy will be maintained in the upcoming months," he noted.
The pace of price growth in the services sector is still somewhat high, mainly due to relatively significant wage increases in this sector, Rehn added.
Given the current economic data, a return to zero interest rates is "unlikely," Rehn said, noting that the ECB has unconventional monetary policy tools that can be deployed in case of excessive inflation slowdown.
Rehn estimates the neutral interest rate level to be around 2.5% and considers it likely that this level will be reached by the end of winter. In the context of Finland, winter could extend until June, he joked.
It is expected that at the meeting scheduled for next week, the ECB will lower the key deposit rate by a quarter percentage point to 3%.