ECB Should Keep Hiking Until Underlying Inflation Pressure Subsides, Knot Says

7 May 2023

By Xavier D’Arcy – FRANKFURT (Econostream) - The European Central Bank needs to continue raising rates until underlying inflation pressures in the Eurozone have abated, Governing Council member Klaas Knot said on Sunday.

In an interview with Dutch television interview programme Buitenhof, Knot, who heads De Nederlandsche Bank, said that rate hikes would have to continue ‘as long as the underlying inflation hasn’t been tamped down’.

He confirmed that he supported a step down from 50bp to 25bp hikes at last week’s meeting: ‘[W]e have considered it responsible, and that was also my position in the meeting, to take a step back from half a percentage point to a quarter percentage point per meeting.’

The ECB’s ‘real problem at the moment’ was that ‘core inflation is still too high’, he said. He predicted that the ECB may reach its 2% inflation target ‘sometime in 2025.’