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ECB’s Knot says several 50 bps rate hikes possible if inflation worsens
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BRUSSELS (Reuters) -European Central Bank policymaker Klaas Knot told Dutch radio broadcaster BNR on Friday the ECB may need to make several 50 basis point rate hikes if inflation continues to rise and that he expected about 200 basis points of hikes.
BRUSSELS (Reuters) -European Central Bank policymaker Klaas Knot told Dutch radio broadcaster BNR on Friday the ECB may need to make several 50 basis point rate hikes if inflation continues to rise and that he expected about 200 basis points of hikes.
Referring to core inflation, he said: “If it continues to rise then we will continue to intensify, and there will be multiple interest rate hikes of 50 basis points.”
Knot indicated he thinks 200 basis points of hikes are needed over the next several months.
“Then we’ll have to look whether that’s enough to bring inflation back to 2 percent in the middle to long term,” he told BNR.
“If it’s not enough then the interest rate will have to go up further. I can’t attach a percentage to that, impossible. It will take a while to get the first two percentage points … I don’t expect we’ll be there before the beginning of 2023.”
Concerned by surging inflation, the ECB last week said that it would raise its key interest rates in July by 25 basis points and again in September, when a bigger increase will be necessary if the outlook has not improved.
Knot had told French newspaper Le Monde on Tuesday the ECB’s options for a September interest rate hike were not limited to 50 basis points.
The Dutch central bank chief’s latest comments bolster his hawkish stance on what he called “scandalously high inflation” in the interview aired on Friday.
Figures on Friday confirmed that euro zone inflation rose to a record high 8.1% last month, more than four times the ECB’s target.
The ECB has said it aims to raise rates towards the neutral level, where it is neither stimulating nor slowing economic growth. The neutral rate is unobservable but most policymakers put it somewhere between 1% and 2%.
(Reporting by Marine Strauss, Toby Sterling and Balazs Koranyi @StraussMarineEditing by Mark Potter and Catherine Evans)
The European Central Bank (ECB) is the central bank for the euro and is responsible for monetary policy within the Eurozone, aiming to maintain price stability and oversee the financial system.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks often aim to control inflation to maintain economic stability.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central bank policies and affect economic activity.
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
Basis points are a unit of measure used in finance to describe the percentage change in value or interest rates. One basis point is equal to 0.01%.
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