Klaas Knot, a member of the European Central Bank’s Governing Council, stated that monetary tightening after the upcoming meeting is not guaranteed. He indicated the possibility of officials pausing their campaign of interest-rate hikes soon.
Being one of the most hawkish members of the ECB’s Governing Council, Knot’s remarks imply a more cautious approach towards rate increases than anticipated by some investors.
In an interview with Bloomberg TV, Knot expressed his belief that a 25 basis point rate hike is necessary at the July meeting. However, he emphasized that any actions beyond July would be a possibility rather than a certainty.
Knot emphasized the importance of closely monitoring data to assess the risks surrounding the baseline. While the ECB predicts a decrease in inflation to 2% by 2025, Knot considers this view to be optimistic.
The ECB faces mounting pressure to raise interest rates to combat high inflation, currently at a record high of 8.6% in the eurozone. However, the bank is also concerned about the potential negative impact of rate hikes on the already slowing economy.
Considering Knot’s statements, the ECB is likely to approach rate hikes cautiously. It may raise rates by 25 basis points in July and subsequently pause its hiking cycle.
