(Reuters) -The European Central Bank may need to lower interest rates further and shouldn’t exclude a larger reduction, Governing Council member Olli Rehn told Bloomberg News in an interview.
“If in June inflation is projected to fall below our 2% inflation target over the medium term, then the right reaction is to cut rates further,” he said in the interview in Washington.
Rehn warned that financing conditions had tightened recently, and risks to economic growth had begun to be realised, the report added.
The ECB will make a “comprehensive assessment and decide on rates”, the Finnish central bank governor said, adding that “there is so much pervasive uncertainty in the air that we have to move meeting by meeting”.
Rehn said the possibility of a larger-than-normal 50-basis point rate cut would depend on the medium-term inflation outlook and whether the growth outlook improved or deteriorated.
The ECB cut rates for the seventh time in a year last Thursday by 25 basis points to 2.25%, saying that disinflation was well on track and risks were rising that price growth is even weaker than previously thought.
Sources speaking to Reuters on condition of anonymity said earlier this month that an ECB rate cut in June was still highly possible and only a major easing in trade tensions would persuade it to pause.
(Reporting by Rajveer Singh Pardesi in Bengaluru. Editing by Mark Potter)
