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ECB’s Knot Sees Interest-Rate Hike as Early as October

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European Central Bank Governing Council Member Klaas Knot said he expects an interest-rate increase as early as in the fourth quarter.

Borrowing costs are typically tightened in 25 basis-point steps and “I don’t have reason to think differently this time,” he said in a Buitenhof interview on Sunday. 

The ECB last week made a hawkish pivot, with President Christine Lagarde — faced with the fastest inflation since the euro was created — now no longer excluding a rate hike this year. Policy makers privately see a shift in formal guidance materializing as soon as next month, when they’ll get new economic forecasts and reassess their bond-buying. Tightening policy would bring the Frankfurt-based in line with global peers.

Knot, one of the ECB’s most hawkish officials, said he expects euro-area inflation to stay above 4% for much of 2022. 

“We are not in the same situation as the U.S. where the inflation is internally caused,” he said. “The majority of inflation comes from abroad, there’s not much we can do about it.”

Inflation in the Netherlands accelerated to 7.6% in January, the highest level in data going back to 1997. In the euro area, consumer prices unexpectedly jumped an annual 5.1%, remaining more than double the ECB’s 2% target.

©2022 Bloomberg L.P.

ECB’s Knot Sees Interest-Rate Hike as Early as October

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