ECB’s Knot: ‘We Have to Hang in There for Quite a Long Time’

18 November 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Klaas Knot on Friday said that the terminal rate of the current ECB hiking cycle could not be known under the current circumstances, but that monetary authorities still had much to do.

In a panel discussion following his speech at the European Banking Congress, Knot, who heads De Nederlandsche Bank, said when asked about the terminal rate, ‘We still have a long way to go’, meaning that ‘we still have ample time to think’ about it.

‘But I really don't know’, he said, given that ‘these times are really unprecedented’ in terms of major shocks and uncertainty is thus high.

‘What I clearly think is relevant here’, he said, is that ‘we have to hang in there for quite a long time.’

Compared to the US, ‘potentially disinflation might be a slower and more grinding process’ than in Europe, he said.

‘We will see how the economy will respond’, he said. Noting that the ECB’s measures to date would start having more of an impact later next year, ‘we will have to respond to that as we go’, he said.

‘I’m more worried about us doing too little than doing too much’, he said, adding however that the situation would naturally become more stable at some point, at which time the ECB would need to take a more balanced view.