ECB’s Knot: Might Not Need to Go Below Neutral if Target Is Reached by Mid-2025

22 January 2025

ECB’s Knot: Might Not Need to Go Below Neutral if Target Is Reached by Mid-2025
Klaas Knot, governor of De Nederlandsche Bank, at the European Central Bank Forum on Central Banking in Sintra, Portugal on July 3, 2024. Photo by the ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Klaas Knot said on Wednesday that he was not sure yet that the ECB would have to cut interest rates to accommodative territory if inflation hit the 2% target by mid-2025.

In an interview with Bloomberg TV, Knot, who heads De Nederlansche Bank, said that ‘[i]f the recovery proceeds, if we approach target by the middle of the year, then I'm not convinced yet we need to get into stimulative mode.’

Knot acknowledged that there was ‘a range for neutral’ which gave the ECB ‘some leeway.’

‘Let's not get head over heels here, the data will tell us where to go’, he added.

Data were promising and corroborated the idea that inflation in the Eurozone would go back to 2% during 2025, he said. The economy would also 'finally' experience some recovery, he said.

‘I'm pretty comfortable with the market expectations for the upcoming two meetings and farther than that I find it's too early to comment’, he said.

There were risks that would surface in the medium- and long-term, like the impacts of US President Donald Trump’s trade policies on the global economy and on the inflation outlook, according to Knot.

 

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