Bart H. Meijer and Toby Sterling

AMSTERDAM, (Reuters) – Klaas Knot is the Dutch central bank president, and a member the European Central Bank’s Governing Board. He stated that he expected the ECB will raise interest rates during the fourth quarter.

Knot spoke on Dutch TV’s Buitenhof and stated that he supports the end of the asset buying programme of the eurozone central bank.

“Personally, I anticipate our first rate rise to occur around the fourth quarter this year ….. Normally, we raise rates by 25%. I don’t see any reason why we wouldn’t take another step. Then he stated that a second increase would be likely in the early part of 2023.

Knot’s remarks come after ECB President Christine Lagarde https://www.reuters.com/business/ecb-seen-hold-may-acknowledge-inflation-risks-2022-02-02 on Thursday opened the door to an interest rate increase in 2022 but said it was “unlikely”.

The bank needs to stop its asset purchase programmes. They are being cut in stages to reach 20 billion euros per month ($22.89 trillion) by the fourth quarter. On Thursday, the bond market has begun to price in 40 basis points for rate rises.

Knot stated that the first rate increase will be followed by two more, which will help us get out of negative territory.

“If we don’t expect a wage-price rise and inflation expectations stay anchored to our 2% target, there isn’t much reason to raise rates quickly and dramatically.”

Knot indicated that at 5.1% in January the inflation rate in the Euro zone was too high and it will likely remain there until 2023 if energy prices do not rise unexpectedly.

($1 = 0.8736 euros)