European Central Bank member: We plan to abandon the restrictive monetary policy by mid-summer.

The Governor of the Finnish Central Bank and policymaker at the European Central Bank, Olli Rehn, stated on Tuesday morning that the European Central Bank plans to continue lowering interest rates in the upcoming period, adding that he expects the ECB to likely abandon restrictive monetary policy by mid-summer. However, Rehn clarified that there is still a high degree of uncertainty due to the potential effects of the tariffs that Trump intends to impose during his administration, adding that the repercussions of these tariffs may complicate the ECB's economic forecasts. The policymaker at the ECB also discussed the scenarios surrounding the new trade policies of the U.S. administration, which could increase business costs. Despite the doubts regarding the effectiveness of trade barriers, Rehn noted that companies often circumvent tariffs by rerouting supply chains through intermediary countries like Mexico and Vietnam. Yet he pointed out that although these circumventions help enhance economic resilience, they also increase operational costs. Rehn emphasized that companies are adept at adjusting production to avoid tariffs, highlighting the limited impact of such policies. Rehn mentioned that his estimates for the real neutral interest rate, adjusted for inflation, are in the range of 0.2% to 0.8%, which places the deposit rate at the European Central Bank in a target range of 2.2% to 2.8% if inflation aligns with the 2% target. Markets are already expecting the ECB to reach the lower bound of this range by the upcoming June meeting, before decreasing further by the end of the year.