ECB’s Knot says several 50 bps rate hikes possible if inflation worsens -Breaking
BRUSSELS (Reuters). -European Central Bank policymaker Klaas Knot stated to BNR that the ECB could need to increase its rate by 50 basis points if inflation keeps rising and that he was expecting about 200 basispoints of increases.
He spoke out about core inflation and said that if it rises, then the intensity of inflation will increase, which will lead to multiple rate increases, each one exceeding 50 basis points.
Knot said that 200 basis points of increases are necessary over the following months.
He said to BNR, “Then we will have to see whether that’s enough for inflation to return to 2 percent over the medium to long term.”
The interest rate may have to rise if it doesn’t suffice. It’s impossible to attach a percentage. To get those first two percentage point will require some time. It will take a while to get the first two percentage points. I doubt we’ll reach that point before 2023.
The ECB was concerned about rising inflation and announced last week that they would increase their key interest rates by 25 basis points in July, then again in September. If the outlook is not improving, a larger increase will be required.
Knot told French newspaper Le Monde Tuesday that the ECB had more options than 50 basis points for a September rate increase.
In his latest interview, the Dutch central bank chief said that he was reaffirming his hawkish views on “scandalously” high inflation.
The latest figures on Friday showed that inflation in the Euro zone rose to 8.1%, which is four times higher than the ECB target.
The ECB stated that it aims to increase rates toward the neutral level. It is neither slowing nor stimulating economic growth. It is not easy to determine the neutral rate, but policymakers tend to place it between 1% – 2%.