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Dutch Central Bank Governor Nott expects ECB rate hikes to slow down

Dutch Central Bank (DNB) Governor Klaas Knott said the interest rate hike announced by the European Central Bank (ECB) will be tapered in the near future. He expressed this expectation in a speech at the European Banking Conference in Frankfurt. Knot said the ECB is entering a new phase with a new strategy to bring down high inflation.

“Looking ahead, at next month’s policy meeting, we expect to reach broadly neutral territory. At that point, we are no longer stimulating economic growth, but we are not decelerating either. Territories are like halftime in football where the coach gathers all the players around a whiteboard and draws out a game plan for the second half, and the team back on the field might play differently. For example, you can have more tiki-taka than continuous kick-and-rush,” Knox said.

Knot also used the football field comparison for an unprecedented 0.75% interest rate step in recent months. “In retrospect, I wasn’t exactly sure where monetary policy was headed, but I was convinced that we had to leave accommodative territory as soon as possible. tactics reflect a kind of kick-and-rush spirit, and the 50bps and 75bp rate hikes reflected our desire to accelerate action and reach a more neutral stance on policy rates as quickly as possible. I’m here,’ he said.

But now Knot expects a different approach. “Going into the second half, our game plan is likely to change from long shots on target to short passes and quick moves. It also allows us to use a complete palette of tools that is becoming more diverse.”

At the same time, Knot continues to stress that unprecedentedly high inflation must be brought under control as soon as possible. If not, he believes lowering price levels will only make it more expensive.Inflation in euro countries is expected to average 8.5% this year. In the Netherlands he rises to 11.6%.

“For a long time, inflation was largely a non-issue. But today, inflation is raging, and it matters to everyone. A year later, it has even fallen below zero,” he said on Friday. “And yesterday, for the first time in its history, Eurostat reported double-digit headline inflation of 10.6%. , More worrying from our perspective is that core inflation (excluding energy, food, alcohol and tobacco) has reached a record high of 5.0 percent.”

Bloomberg News reported earlier this week that sources told reporters that ECB policymakers were aiming to raise interest rates by half a percentage point next month.

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