Top ECB officials see price pressures moving either way in coming months

Top officials at the European Central Bank said Thursday that price pressures could move either way in coming months, with factors ranging from economic growth to trade disputes playing a role in the outlook.

Olli Rehn, who sits on the ECB’s Governing Council, told Bloomberg TV that the bank needs to keep all options open when it comes to interest rates. He pointed to several forces that could affect prices in the months ahead.

On the one hand, faster economic growth could push consumer prices higher. On the other hand, cheaper energy, a stronger euro, and smaller wage increases could hold prices down.

“We have risks that are two sided,” Rehn said during the IMF’s annual meetings in Washington. As quoted by Bloomberg, he added “It’s important in the current context where we have pervasive uncertainty still due to trade wars and due to geopolitical tensions that we maintain full freedom of action.”

Rate cuts on hold after eight reductions

The central bank has already lowered borrowing costs eight times, each time by a quarter point. But since June, officials have left rates alone. Most observers expect them to do the same when they meet again this month.

Inflation across the 20 countries that use the euro is sitting close to the bank’s 2% target. Forecasts show it staying around that level going forward, with the economy picking up steam in coming years.

Still, some officials worry that growth might not be as strong as expected, which would drag down prices. Most policymakers think rate cuts are probably finished, though a few say more moves shouldn’t be ruled out.

Rehn, who has worked in both central banking and politics for many years, is seen as a top candidate to become ECB vice president when Luis de Guindos finishes his term in May 2026. That would start a two-year period of change at the bank, replacing two-thirds of its top leadership, including President Christine Lagarde.

When asked about his future plans, Rehn said he hasn’t made any decisions yet and hasn’t “reserved any removal vans.”

China’s export restrictions add new concerns

Meanwhile, another ECB official raised concerns about China’s recent moves on rare earth exports. Madis Muller, who heads Estonia’s central bank, said these restrictions could create new price pressures if they affect the global economy.

“Shortages of some critical inputs could certainly lead to higher prices for certain products, even if it hurts the economy,” Muller said in Washington.

He noted that China’s export controls show how trade barriers “can have an inflationary impact also in Europe,” contrary to the usual thinking that American tariffs would lower European prices.

Under Beijing’s new rules, foreign companies must get Chinese government approval before exporting products that contain even small amounts of certain rare earths from China. President Donald Trump responded by threatening an additional 100% tariff on Chinese goods.

With rates at the right level now, Muller said officials should be “patient” and watch for developments that could move prices in either direction.

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