ECB interest rate picture unclear after September, says Rehn

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Olli Rehn, Governor of the Bank of Finland, attends a Reuters Newsmaker event in London, Britain, May 29, 2019. REUTERS/Hannah McKay

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HELSINKI, July 15 (Reuters) – The European Central Bank is likely to hike rates by 25 basis points next week and 50 basis points in September, but the rate path thereafter is more gloomy amid uncertainty over developments in Ukraine, Finnish politician Olli said Keep going Friday.

Rehn said at a panel discussion that it is clear that the ECB’s mandate is price stability, “and we act on it and emphasize that each euro state has its own responsibility for its own economy and economic policies”.

Alongside an energy crisis, high inflation and risks of recession, the ECB is also balancing the impact of a political impasse in Italy as it prepares for next Thursday’s monetary policy meeting.

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The energy crisis could hit Italy particularly hard as the government of Mario Draghi – which has “brought much-needed stability, tenacity and firmness to Italian decision-making” – is on the brink of collapse, Rehn said. nL8N2YV208]

Speaking at a political gathering in the Finnish city of Pori, Rehn said the ECB’s post-September interest rate picture depends on whether “we see another cold snap in the European economy stemming from a possible intensification of the war in Russia.”

Rehn said the energy crisis could still lead to a recession even if the ECB manages to get inflation under control by gradually normalizing monetary policy.

All but one of 63 economists polled by Reuters this week said they expected the ECB to stick to a previously announced quarter-point hike next week, although 19 out of 35 said it should do a 50 basis-point hike consider.

A majority forecast a 50 basis point hike in September, followed by a quarter point increase in October and December.

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Reporting by Essi Lehto Editing by Stine Jacobsen, David Goodman and John Stonestreet

Our standards: The Thomson Reuters Trust Principles.

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