ECB's Rehn Looks to U.S. Amid Call to Review Policy Strategy

(Bloomberg) -- Finnish central bank Governor Olli Rehn doubled down on his push for the European Central Bank to review its monetary-policy strategy, pointing to the Federal Reserve’s own assessment of its framework.

Aging populations, declining long-term interest rates, and climate change are becoming key policy issues, and their implications for growth and inflation must be better understood, Rehn, who sits on the ECB’s Governing Council, said in Helsinki on Monday. That’s separate to the shorter-term battle currently under way to combat headwinds for economic growth and inflation.

“Monetary policy is done in an economic environment that looks very different from that of 16 years ago, when the ECB last reviewed its strategy,” the 57-year old said. “Several central banks, including the Federal Reserve, are currently reviewing their monetary policy frameworks.”

Rehn’s call for a rethink of the ECB’s strategy has been a central plank of his candidacy in the race to succeed Mario Draghi, whose term as president of the central bank ends in October.

Federal Reserve Vice Chair Richard Clarida, whose own institution recently held a conference on its review, was also present at the Bank of Finland event. He argued that while the appraisal “does not suggest that we are dissatisfied with the existing policy framework,” persistent inflation shortfalls carry the risk that longer-term expectations for price growth become poorly anchored.

“A number of central banks in the world do regular reviews,” he said in response to a question by Rehn on what advice the Fed’s exercise holds for other central banks. “Certainly we’re not the first, and we’ve learned and benefited from these other processes. I do believe that each bank that might consider doing a review will find it wise to customize it -- I don’t think there’s a one-size-fits-all.”

To contact the reporters on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net;Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editor responsible for this story: Paul Gordon at pgordon6@bloomberg.net

©2019 Bloomberg L.P.