European Central Bank Governing Council member Olli Rehn said on Monday that more rate cuts forecast are correct if the outlook shows an undershoot of 2% inflation.
The official noted that tariff effects in the eurozone are two-way, and that trade war and the enormous uncertainty it brings are now holding back growth.
Rehn observed that underlying inflation pressures are easing and agreed with markets that tariffs will slow down inflation. "I find it reasonable to assume that there are downside risks to the inflation outlook in the ECB's March projections," he added.
The policymaker also pointed out that some downside risks foreseen in the ECB's March projections have already materialised, weakening the growth outlook further, and emphasised that the euro exchange rate plays an important role in assessing the policy course.
Rehn also said the ECB does not plan to change much regarding its available policy tools and, on banking regulation, stressed that while simplifying rules is possible, deregulation must be avoided, as capital buffers are key for resilience.