Olli Rehn, a member of the European Central Bank's Governing Council, signaled a hawkish stance on Wednesday, emphasizing that the ECB must be ready to respond rapidly to any signs of entrenched inflation.
Rehn's comments come as euro area inflation stabilizes near the ECB's 2% target, but he warned that rising wages and prices could keep pressure on the central bank. He stated that while negotiated wage growth is expected to normalize in the coming years, consumer inflation expectations have ticked up.
The ECB recently held key interest rates unchanged, navigating a delicate balance between upside inflation risks and downside growth concerns.
Market odds on Polymarket currently price a 100% probability of a 50+ basis point decrease at the April 2026 meeting. However, traders are reassessing that consensus in light of Rehn's remarks. The hawkish commentary suggests a reduced likelihood of a cut, as the central bank appears focused on preventing inflation from becoming entrenched.
Investors now await further guidance from ECB President Christine Lagarde and the central bank's next policy meeting, which could provide clarity ahead of the April decision.