ECB’s Knot: Decisions Should Be Based on Data, Not on Future Developments

18 June 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Klaas Knot on Tuesday said that there was still uncertainty about inflation and that monetary policy decisions should be based on incoming data, not on expectations.

In in an introductory statement prior to a session at the Dutch Standing Parliamentary Committee for Finance, Knot, who heads De Nederlandsche Bank, said, according to a text provided, ‘Looking ahead, however, there are risks to the economy and our financial system, with uncertainty being a central concern. First, inflation might start rising again, for example due to continued strong wage growth. It is therefore important to base further monetary decisions on incoming data rather than pre-empting future developments.’

Inflation had fallen ‘substantially’ in the Netherlands and in the euro area, he said, and there was confidence in a soft landing for the Dutch economy.

It was important, however, to acknowledge that financial market corrections to geopolitical tensions, high share prices and political uncertainty in the context of fragmentation posed risks this scenario, he said.

‘As well as the need for greater awareness and analysis of these risks by financial institutions and policymakers, I also see scope for action by national governments’, he said.

An appropriate macroprudential toolkit for financial institutions was necessary given the increasing level of uncertainty, he said.