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ECB’s Rehn warns governments to count on higher rates By Reuters


© Reuters. FILE PHOTO Olli REHN, Finland’s central banking governor speaks in Helsinki on July 17, 2018. REUTERS/Ints Kalnins/File Photo

HELSINKI (Reuters) – Finland’s central bank raised its 2021 growth estimate on Thursday and warned that even if a rate hike is still far into the future, governments should prepare for the eventual rise in borrowing costs.

Due to increasing vaccination rates, and supportive economic policy the central bank expects Finland to grow its gross domestic product by 3.5% by 2021. This is up from 2.9% in June. The 2022 forecast was cut to 2.8% from 3 %.

However, the central bank stated that countries in the Euro Area have high debt levels which could affect the stability of their expansion.

Olli Rehn, chief of the Finnish central bank said that even though an increase in interest rates was not imminent, it would eventually happen. All countries in the euro zone should take this into consideration when planning their budgets.

This central bank raised the inflation rate for 2021 by 1.5% to 1.5%, and retained its forecast of 1.6% for 2022.

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