ECB's Rehn Sees No Clear Second-Round Inflation, Backs Joint Debt for Defence

European Central Bank policymaker Olli Rehn said on Thursday that the euro zone shows no clear evidence of second-round inflation effects, and he backed the use of jointly-issued debt to strengthen the region's defence capabilities.

Speaking at an event in London, Rehn noted that the euro zone's labour market does not display the same tightness witnessed in 2022, following Russia's invasion of Ukraine and the aftermath of the COVID crisis. He said the central bank is monitoring that situation, along with other data, closely.

Rehn also said the ECB is keeping a close watch on the "political scenery" in Europe, with elections due in countries such as France next year. He stressed that the bank has a toolbox of "viable instruments" to ensure the smooth transmission of monetary policy.

The remarks touch on two issues facing the euro zone: the path of inflation and the debate over common borrowing for defence. Rehn's comments suggest he sees no urgent wage-price spiral, while supporting joint debt as a tool for defence spending.