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ECB rates picture unclear after September, says Rehn

·1-min read
Governor of the Bank of Finland, Olli Rehn attends a Reuters Newsmaker event in London

HELSINKI (Reuters) - The European Central Bank is likely to raise interest rates by 25 basis points next week and by 50 in September, but the rate path thereafter is murkier given uncertainty over developments in Ukraine, Finnish policymaker Olli Rehn said on Friday.

Rehn told a panel discussion it was clear that the ECB's mandate was price stability "and we act accordingly and emphasise that each euro state has its own responsibility for its own economy and economic policy".

As well as an energy crisis, high inflation and recession risks, the ECB is also balancing the impact of a political impasse in Italy as it prepares for next Thursday's policy meeting.

The energy crisis could hit Italy particularly hard as the government of Mario Draghi - who had brought "much-needed stability, perseverance and firmness to Italian decision-making" - teeters on the brink of going under, Rehn said. nL8N2YV208]

Speaking at a political gathering in the Finnish city of Pori, Rehn said the ECB's interest rate picture after September depends on whether "we see another cold spell in the European economy due to Russia's war possibly intensifying."

Rehn said the energy crisis could still result in a recession even if the ECB managed to get inflation under control by gradually normalising monetary policy.

All but one out of 63 economist polled by Reuters this week said they expected the ECB to stick to a pre-announced quarter-point rise next week, though 19 out of 35 said it should consider a hike of 50 basis points.

A majority forecast a 50 basis point hike in September, followed by quarter-point rises in October and December.

(Reporting by Essi Lehto; Editing by Stine Jacobsen, David Goodman and John Stonestreet)

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