Rehn says energy shock keeps euro inflation above target

Bank of Finland Governor Olli Rehn told the Citi Macro Forum in Bangkok that euro area inflation remains above target mostly on higher energy prices, that it is not broad based, and that the ECB's role is to stop temporary shocks becoming embedded in expectations and wage setting.

Why it matters: Rehn's account, with euro area growth revised up to slightly less than 1 percent this year and about 1.5 percent in each of the next two, frames the October 29 ECB meeting as a vigilance decision: moderate wage growth and limited second round effects argue for steadiness, not another move in either direction.

Data as of Introductory remarks by Olli Rehn at the Citi Macro Forum, Bangkok, October 14, 2026, published in the Bank for International Settlements speech library on October 19, 2026; text read in full. Growth figures are the ECB's September forecast revision as cited in the remarks. Single primary source, hence grade B.

Euro area inflation remains above target mostly because of higher energy prices, Bank of Finland Governor Olli Rehn said in Bangkok, and the qualification matters for the European Central Bank’s October 29 decision. Inflation is currently not broad based, wage growth remains moderate, and second round effects have so far remained limited, he said, while upside risks have increased and require vigilance and a steady commitment to price stability. Monetary policy cannot produce more oil, reopen shipping lanes or resolve geopolitical conflicts, but it can ensure temporary shocks do not become permanently embedded in inflation expectations and wage setting behaviour.

The growth side gives the Governing Council room to be steady. The ECB revised its euro area growth forecast up in September, to slightly less than 1 percent this year and around 1.5 percent in each of the following two years, supported by defence spending and infrastructure investment, gradually improving consumer confidence, and visible AI related activity in investment, digital services and exports. Finland’s own outlook has improved on stronger exports and a data centre boom drawing investment into clean electricity and digital infrastructure, with Finnish electricity production now 96 percent fossil free.

Rehn set the policy problem inside three strategic tests for Europe: security, energy resilience, and productivity growth, where the decisive AI question is adoption at scale rather than invention. Rapid innovation can bring misallocation of capital, valuation corrections and market volatility, he noted, but the transformation continues regardless. His conclusion for the central bank was narrow: provide the stable foundation, a steady hand amid uncertainty, while unity, investment and sound policy do the rest. It is the same message, in Governing Council language, that markets took from Morgan Stanley’s assessment on Monday that lower ECB hike expectations are justified, and it leaves the burden of proof on the data rather than on another rate move this month.

Rehn says energy shock keeps euro inflation above target

Sources