The European Central Bank may need to raise interest rates in June and July following next month’s hike, according to Governing Council member Klaas Knot.
(Bloomberg) — The European Central Bank may need to raise interest rates in June and July following next month’s hike, according to Governing Council member Klaas Knot.
“It’s too early to talk about a pause,” the Dutch central bank chief told the Irish Times newspaper in an interview published Thursday. “For a pause, I would really need to see a convincing reversal in underlying-inflation dynamics.”
The ECB is widely expected to raise rates again on May 4, though the pace of tightening remains in doubt as other global central banks approach the end of their hiking cycles. As well as price pressures, policymakers are assessing the fallout from the recent financial-sector stress before deciding on whether to opt for a quarter- or half-point step.
Knot, who’s among the hawkish members of ECB’s Governing Council, said the size of the next rate move will probably be determined by April inflation data, which will be published two days before the meeting.
He said he’s “not uncomfortable” with the current money-market wagers on a further 75 basis points of tightening.
“We are now in what I would call mildly restrictive territory with policy rates but inflation is not mild,” he said. “Inflation is still much too high. We need a sufficiently restrictive stance. Where is sufficiently restrictive? I don’t know but clearly not where we are today.”
(Updates with more comments from Knot in fifth paragraph.)
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