ECB’s Rehn: Monetary policy should not be based on oil prices alone

European Central Bank (ECB) official and Finnish Central Bank Governor Olli Rehn said during European trading hours on Wednesday that higher oil prices should not be the only factor to direct monetary policy decisions. Rehn added that the central bank needs to assess the scope of energy shocks.

Additional comments

ECB needs to assess whether the energy shock spreads to inflation expectations, wages and core inflation.

It's worth preparing for a protracted conflict in the Strait of Hormuz.

If events turned out differently, it would be easier to adjust.

Key factors are the strength and duration of the energy shock and any broader pass-through into inflation.

The energy shock is not, at least so far, quite comparable to the 2022 shock.

The ECB is committed to keeping inflation stable around 2% over the medium term.

Market reaction

There seems to be no immediate impact of ECB Rehn's comments on the Euro (EUR); however, EUR/USD has recovered to near 1.1715 from the intraday low of 1.1695, at the press time, driven by a slight correction in the US Dollar (USD).

(This story was corrected at 11:35 GMT（UTC+8） to say in the first paragraph that higher oil prices should not be the only factor to direct monetary policy decisions)