Klaas Knot, President of Nederlandsche Bank, spoke to CNBC in Davos.
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DAVOS, Switzerland — The European Central Bank will not stop with a single 50 basis-point hike at its next rate-setting meetings, a board member told CNBC on Thursday.
“It won’t stop after a single 50 basis point hike, that’s for sure,” Klaas Knot, who serves as governor of the Dutch central bank, said of the ECB’s upcoming moves.
The European Central Bank hiked interest rates four times over the course of 2022, bringing its deposit rate to 2%. The central bank said in December it would raise interest rates again in 2023 to counter sky-high inflation.
Recent data has shown a slowdown in headline inflation, albeit well above the ECB’s 2% target.
According to preliminary figures, inflation in the euro zone in December was 9.2%. This was the second consecutive monthly decline in inflation across the euro zone. However, Knot doesn’t think all of the current data is “encouraging.”
“What we have seen so far is data that is not encouraging from our side,” he said at the World Economic Forum in Davos.
“We saw another inflation reading that showed no sign of abating [the] underlying inflationary pressures. So we have to do what we have to do and core inflation in the euro area is not over yet and that means the market developments that I’ve seen over the last, say, two weeks or so aren’t entirely welcome from my perspective . I don’t think they are actually consistent with a timely return of inflation towards 2%,” Knot said.
Market participants expect the ECB to hike rates at its next meeting in February. The broader question is whether the central bank is becoming too aggressive in tightening monetary policy and limiting economic growth. However, Know has clarified that there will be at least two more rate hikes.
“Most of what we need to cover, we’re going to cover at a steady pace of multiple 50 basis point increases,” he said.
“Where this 50 basis point pace will end I can’t predict, but it’s very clear that our President used the plural in her language, I’m using the plural here. So it won’t stop after a single 50 bps hike, that’s for sure.”