By Toby Sterling and Bart H. Meijer
AMSTERDAM (Reuters) – Klaas Knot, governor of the Dutch central bank and a member of the board of directors of the European Central Bank, said on Sunday he expected the ECB to raise interest rates in the fourth quarter of this year.
In an interview with the Dutch television program Buitenhof, Knot, known as one of the most aggressive members of the ECB’s board, said he supported ending the eurozone central bank’s asset purchase program as soon as possible.
“Personally, I expect our first rate hike to take place around the fourth quarter of this year… Normally we would raise rates by 0.25 percentage point, I have no reason to expect us to take a different step.” He added that he thought a second rally would likely occur in early 2023.
Knot’s comments come after ECB President Christine Lagarde on Thursday opened the door to an interest rate hike in 2022 but said it was “unlikely”.
The bank must first end its asset purchase programs, which tend to be reduced in stages to 20 billion euros a month by the fourth quarter. However, since Thursday, bond markets have started pricing in around 40 basis points of rate hikes through December.
“The first two rate hikes will follow quickly as they take us out of negative territory,” Knot said.
“After that, if we don’t see a price and wage spiral and inflation expectations remain anchored to our 2% target, there’s not much reason for us to raise rates significantly and quickly.”
Knot said eurozone inflation, at 5.1% in January, was too high and would likely last until 2023 before retreating – assuming there are no more unexpected increases in energy prices.
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