Olli Rehn: “This is an overreaction of market forces”

Bank of Finland Director General Ollie Lane Believe that the market turmoil at the beginning of the week was an overreaction.

On Monday, Japanese stocks plunged more than 12%. During the day, concerns and panic also spread to European and American stock markets. However, on Tuesday and Wednesday, concerns about a stock market crash subsided and the market calmed down, at least temporarily.

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Rehn gave the opening speech at the Bank of Finland’s summer symposium on Wednesday, in which the CEO called the events of the first week an overreaction.

“My personal understanding is that this is an overreaction of market forces amid holiday uncertainty and thin market liquidity, rather than due to any fundamental economic issues.”

Weak liquidity refers to the relatively low volume of stock market trading in late summer. When trading is reduced, the selling pressure in the market may cause a larger price reaction. Being evaluated  One reason for Monday’s stock market turmoil.

Another key explanation for Monday’s events was weaker-than-expected U.S. jobs data released last Friday. Ryan commented that despite this, the U.S. real economy remains strong.

“Despite the weak data, the U.S. real economy remains relatively strong.”

‘We are watching closely’

As CEO of the Bank of Finland, Rehn is also a member of the Governing Council of the European Central Bank (ECB), and represents the Bank of Finland at ECB meetings. The ECB determines monetary policy for the eurozone.

Among the world’s major central banks, the Bank of Japan held an emergency meeting on Tuesday due to market turmoil. On Wednesday, the central bank’s board announced that it did not plan to raise interest rates during the market turmoil. Tell  For example, Reuters.

In his speech, Rehn also commented on the role of the ECB if the situation in financial markets continues to be uncertain. However, he made it clear that the ECB would not react to individual market changes.

“Central banks tend not to react to individual market developments. We are still closely monitoring developments in the overall economic picture, both in terms of price and financial stability as well as growth and employment.”