“It’s too early to talk about a breakup,” said Knot, who is also a director of the ECB. “For a break, I really need to see a convincing reversal in underlying inflation dynamics.” Knot has often said that the end of rate hikes is not yet in sight.
Increase in May
The ECB is widely expected to raise interest rates again on May 4 in the fight against inflation. Some doubts remain about the extent of the interest rate hike. In addition to the increase in consumer prices, ECB policy makers will also take into account the consequences of the recent turmoil in the financial sector when deciding on an interest rate hike by a quarter or half a percentage point.
According to Knot, known within the ECB as a proponent of aggressive rate hikes to fight inflation, the size of the next rate hike will likely be determined by the April inflation data. These figures will be announced two days before the political meeting.
‘not uncomfortable’
He went on to say that he was “not uncomfortable” with the current market expectation that interest rates will rise by a total of 0.75 percentage point over the next few months.
Since last year, the ECB has been trying to reduce inflation by raising interest rates, which makes borrowing more expensive. Inflation in the eurozone cooled markedly in March, but that was mainly because gas, oil and other energy sources became cheaper after last year’s extreme price hikes. So-called core inflation, which does not take into account the sharp swings in energy, food, tobacco and alcohol prices, increased further.