It is unclear whether the European Central Bank (ECB) will raise interest rates further after July to reduce inflation. This was stated by Klaas Knot, executive of the ECB and president of De Nederlandsche Bank (DNB). Knot made his remarks at a meeting of G20 finance leaders in Gandhinagar, India.
It is almost certain that the ECB will hike interest rates again in the eurozone next week to quell inflation. After that, a further increase seems far from guaranteed. “For July I think it’s a necessity, for anything after July it would be a possibility at best, but not a certainty,” Knot said.
Knot is regarded within the ECB as a so-called hawk, an outspoken and stern advocate of interest rate hikes to contain inflation. Knot says underlying inflation has stabilised, but he would like to see more conclusive evidence of that in the coming months.
“From July onwards, I think we need to pay close attention to what the data tells us about risks,” Knot said. Echoing previous comments by ECB colleague Joachim Nagel, the head of the German Bundesbank, Knot stressed it was “impossible to say” what the vote will look like after next week’s interest rate meeting. According to Knot, this is because a lot of relevant data will come out in the meantime.
Criticism
Several European countries have recently criticized a series of interest rate hikes, which would further damage the economy and not actually contribute to a drop in inflation. The financial markets have so far taken into account two further rate hikes of a quarter of a percentage point by the ECB: one in July and one after the summer break in September. This would bring the main interest rate in the euro area to 4%.
Source: BNR
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