ECB’s Knot Urges Policy Stance That Is ‘Neither Accommodative nor Restrictive’

28 May 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Klaas Knot on Wednesday argued for euro area monetary policy to remain in neutral territory.

Speaking in Utrecht in The Netherlands, Knot, said, according to a text provided by De Nederlandsche Bank, which he heads, ‘Against this uncertain, but for now relatively symmetrical, backdrop a monetary policy stance that is neither accommodative nor restrictive is in my view appropriate.’

Risks to both growth and inflation were ‘clearly’ on the downside in the near term, but the medium term was less clear, he said.

‘Even if demand remains subdued due to heightened uncertainty, persistent disruptions in global supply chains and retaliatory trade measures could exert upward pressure on prices’, he said. ‘Moreover, the fiscal impulse, particularly from increased defense spending, will contribute positively to inflation.’

The ECB was ‘firmly data-dependent and focused on the medium term’, and would restore 2% inflation in any ‘plausible’ scenario, he said.

Models were of limited use under prevailing high uncertainty, he said.

‘Once again, we are confronted with the combination of an adverse demand and an adverse supply shock, and the resulting inflation dynamics may come to cause considerable challenges’, he said.

Policymakers need to be flexible and policy had to be adaptable to situations that deviated from expectations, he said.

‘Equally important is a steadfast commitment to the inflation target and transparency about the risk assessments that underpin policy decisions’, he said.