Finnish ECB Governing Council member Olli Rehn acknowledged that US. tariffs and increased uncertainty are “already having adverse effects” on the Eurozone’s economic outlook, with immediate and near-term growth prospects deteriorating.
However, he pointed out that one offsetting factor could be higher defense spending across Europe, which is expected to provide some support to GDP growth in the medium term.
Rehn took a cautious stance on further ECB rate cuts, refusing to commit to any specific policy actions given the uncertainty surrounding the economic outlook.
While inflation in the Eurozone is stabilizing around the 2% target, he noted that risks are “two-sided.” Despite his cautious tone, Rehn pointed to the ECB’s latest projections, which include several more rate cuts this year if the economy and inflation follow the baseline scenario.
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