ECB’s Knot: Further Cut This Year Not Excluded, But May Have to Stay on Hold ‘Quite Some Time’

27 June 2025

ECB’s Knot: Further Cut This Year Not Excluded, But May Have to Stay on Hold ‘Quite Some Time’
Klaas Knot, governor of De Nederlandsche Bank, at the ECB International Women’s Day 2025 event in Frankfurt on March 7, 2025. Photo by Angela Morant/ECB under CC BY-NC-ND 2.0.

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Klaas Knot said on Friday that he could not rule out an additional interest rate reduction in 2025, but that it could take a while for this to happen.

In an interview with the FT, Knot, who heads De Nederlandsche Bank until the end of this month, said that another 25bp cut this year was ‘difficult for me to exclude’ but far from sure given ‘two-sided’ inflation risks and the need to assess the impact of trade tensions and oil price movements.

‘It may well be that the ECB has to hold rates for quite some time to come as long as you don’t know which way these shocks will actually play out on the medium-term outlook’, he said.

Current interest rates were neither stimulative nor restrictive, he said. ‘That’s a good place to be, regardless of what the future will bring’, he said.

Knot described himself as pleased at the small economic cost of tighter ECB policy. ‘I have been positively surprised that the cost of fighting inflation has been so low this time around compared to the last time when we had such an enormous bout of inflation during the 1970s’, he was quoted as saying. ‘We would have been prepared to accept more economic pain but luckily we didn’t have to.’