Central bank may cut borrowing costs below neutral level — ECB's Olli Rehn

Olli Rehn, a member of the Governing Council of the European Central Bank (ECB), said on Monday that the financial regulator may lower borrowing costs below the neutral level. According to him, US tariffs will impact eurozone inflation more than expected.

The ECB's benchmark rate is currently at 2.25%, which is the upper limit of the neutral range of 1.75% to 2.25%, experts from Reuters remind. That said, officials are increasingly open to a further rate cut in June, potentially larger than the usual 25-basis-point adjustment.

In his statement, Rehn emphasized the central bank's intention to maintain flexibility in its decision-making. The financial regulator is evaluating all options and does not rule out aggressive rate cuts.

Additionally, Rehn is part of a new task force aimed at simplifying banking rules. As he pointed out, reporting requirements are currently excessive, and the creation of a robust capital buffer is necessary to ensure the sustainability of the EU’s banking sector.