HELSINKI: The European Central Bank’s monetary policy has successfully dampened price pressures, Finnish ECB policymaker Olli Rehn said on Tuesday.

The ECB cut its policy rate from a record high last week but did not give any clear indication about further reductions as the outlook for inflation has become murky after some strong wages and inflation data.

“It is important to see the forest for the trees. Considerable progress has been made in bringing inflation down to target, especially since September 2023,” Rehn said in a statement. Inflation had fallen more than 2.5 percentage points since the ECB’s last rate increase in September 2023, he added.

Inflation is expected to return to the ECB’s medium-term target of 2% in the year ahead, despite its downward path “slowing somewhat in recent months”, Rehn said. After last week’s rate cut of 0.25 percentage point, the ECB’s new deposit facility rate stands at 3.75%.

Commenting on the Finnish economy, Rehn said the composition of Finland’s export trade had not adapted to the structural changes occurring in world trade this century.

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In its new forecast, the Bank of Finland sees the Finnish economy gradually moving out of recession, with Finland’s gross domestic product (GDP) for 2024 still showing a year-on-year contraction of 0.5%.

In 2025, the recession will be over and GDP will be up by 1.2%, followed by a growth of 1.7% in 2026, the bank predicted.

“In the longer run, competitiveness can only be improved on a sustainable basis by raising productivity,” Rehn said.