WASHINGTON (Reuters)

European Central Bank policymaker Olli Rehn on Thursday emphasized the potential for an interest rate cut in June, as the ECB’s new forecasts may indicate inflation falling too far.

The ECB reduced rates for the seventh time in a year last week, warning that U.S. tariffs could significantly harm economic growth, which strengthens the case for further monetary policy easing.

Rehn, also the governor of Finland’s central bank, mentioned the likelihood of a rate cut in June. He joined other policymakers in highlighting trade issues’ dampening effects on inflation, exacerbated by a stronger euro and slower economic activity.

“It is quite possible that the projections for medium-term inflation under the current circumstances may well be below our (2%) target,” he stated at a conference hosted by the Reinventing Bretton Woods Committee in Washington during the International Monetary Fund and World Bank’s spring meetings.

Earlier, Rehn noted that such a scenario would support a rate cut, reducing the ECB’s deposit rate to 2%.

At the same event, Lithuanian central banker Gediminas Simkus even mentioned the possibility of a “deflationary environment” in Europe.

ECB President Christine Lagarde refrained from offering specific guidance regarding future actions in her press conference last week, stating that they would depend on incoming data, with policymakers prepared to respond with “readiness and agility” given the high uncertainty.

Philip Lane, the ECB’s chief economist, remarked that there is no single correct approach to uncertainty, suggesting that the eurozone’s central bank might cut rates either more slowly or quickly depending on the conditions.

Lane noted, “If you say, uncertainty means … you go more slowly or you go in smaller steps, (that’s) sometimes true. In other configurations … to grapple with uncertainty, you go big. So I think to be able to say that baseline is not the only guidance, I think it’s super important.”

However, he dismissed the likelihood of resuming bond purchases or extraordinary stimulus measures, asserting that the ECB still has the capacity to cut rates.

Dutch central bank president Klaas Knot and his French counterpart Francois Villeroy de Galhau stated earlier this week that inflation might initially drop due to tariffs and related uncertainties but expressed less optimism about the medium-term consequences.