Inflation is high, and at the same time the economy is suffering from the Russian war in Ukraine. “The long shadows of the COVID crisis and Russian aggression against Ukraine are already taking their toll on the European economy. Energy prices are already high, and now other raw materials are also becoming more expensive.”
However, Rehn warned that the ECB must react to prevent inflation expectations from becoming more stable. “We see signs of second-round effects. We must therefore prevent inflation expectations from becoming entrenched,” he said. “Therefore, it is important that we send the appropriate signal. It is imperative to raise key interest rates in the third quarter, probably in July. And we will continue to normalize monetary policy, provided that the Russian war in Ukraine does not throw the European economy back again.”
At the same time, Rehn allayed concerns about the consequences of a Russian gas supply freeze for the EU and especially Germany. “We are all concerned about the economic consequences of not receiving gas supplies from Russia. We have become overly dependent on Russian supplies of oil and gas and we must now end our energy dependence on Russia,” Rehn told Welt.
FRANKFURT (Dow Jones)
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