ECB knot sees first interest rate hike in the fourth quarter of 2022

Amsterdam — Klaas Knot, the governor of the Dutch Central Bank and a member of the European Central Bank’s board of directors, said on Sunday that the ECB expects to raise interest rates in the fourth quarter of this year.

In an interview with the Dutch television show Buitenhof, Knot, known as one of the more hawkish members of the ECB’s board of directors, said he supported ending the Eurozone Central Bank’s asset purchase program as soon as possible. ..

“Personally, I think the first rate hike will take place around the fourth quarter of this year … Normally, interest rates will be raised by a quarter percentage point, but I expect to take another step. There is no reason. “He added that he thought the second hike was likely to continue in early 2023.

Knot’s remarks came after ECB Governor Christine Lagarde opened the door to a rate hike in 2022 on Thursday, saying it was “unlikely.”

Banks must first complete the asset purchase program. It is currently planned to be phased down to € 20 billion ($ 22.89 billion) per month by the fourth quarter. However, since Thursday, the bond market has begun pricing with a rate hike of about 40 basis points by December.

“The rise in the first two rates takes us out of the negative territory, so it follows each other very quickly,” Knot said.

“Since then, if there is no wage-price spiral and inflation expectations remain fixed at the 2% target, there is little reason to raise interest rates significantly and quickly.”

Knot said inflation in the euro area was too high at 5.1% in January and will probably continue until 2023, assuming energy prices do not rise unexpectedly.

By Toby Sterling and Bart H. Meijer