European Central Bank (ECB) policymaker Olli Rehn addressed an audience in London on Thursday, emphasizing that the euro‑zone is not yet experiencing second‑round inflation pressures. Rehn explained that, unlike the labour‑market tightness seen in 2022 after the Ukraine invasion and the post‑COVID surge, current data do not show a similar wage‑price spiral.

No clear second‑round inflation signals

Rehn said the ECB is closely monitoring inflation dynamics, but the latest indicators suggest that price increases are still largely driven by first‑round factors such as energy costs and supply chain disruptions. He noted that the labour market, while still tight in some sectors, does not exhibit the rapid wage growth that could feed into a broader inflation cycle.

Joint debt as a tool for defence investment

In addition to the inflation discussion, Rehn voiced support for the concept of jointly‑issued debt among European nations to fund defence projects. He argued that a shared financing mechanism would enhance the region’s ability to respond to security challenges while preserving fiscal discipline.

“A coordinated approach to defence financing can provide the necessary resources without over‑burdening any single member state,” Rehn said, adding that the ECB has a “toolbox of viable instruments” to ensure smooth transmission of monetary policy even as fiscal initiatives evolve.

Political landscape under observation

Rehn also highlighted the importance of watching the political environment in Europe, especially ahead of upcoming elections in countries such as France. He assured that the ECB remains prepared to adjust its policy stance as needed, maintaining price stability while supporting the broader economic recovery.

The ECB’s message aligns with its broader strategy of balancing inflation control with the need for economic resilience across the euro‑area. By keeping a close eye on labour‑market trends and advocating for innovative financing solutions, the central bank aims to safeguard the purchasing power of European citizens while reinforcing the continent’s strategic autonomy.

Reporting by Marc Jones; editing by Amanda Cooper.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.