Governing Council Knot: At least two more sharp rate hikes necessary

At least two more “significant rate hikes” are needed, said the governor of the Dutch central bank in a speech in Amsterdam on Monday. Knot also made it clear that the ECB would raise interest rates until medium-term inflation expectations had again reached the central bank’s target of two percent.

The ECB last raised the key interest rate sharply by 0.75 percentage points to 1.25 percent in September. For the upcoming interest rate meeting at the end of October, the market will once again rate hike calculated in this order of magnitude. With the rate hikes, the central bank is trying to get the sharp rise in prices under control. Most recently, the inflation rate in the common currency area was 10.0 percent in September.

ECB Council member Knot is one of the hawkish central bankers and advocates a rather tight one monetary policy. In his speech, he also touched on the issue of reducing the ECB’s balance sheet, which had been swollen as a result of asset purchases. In his estimation, the key interest rates first have to be raised further before the central bank can start reducing the central bank’s balance sheet. Knot expects this in 2023 at the earliest.

/jkr/bgf/stw

AMSTERDAM (dpa-AFX)

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