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ECB's Knot sees first interest rate hike in fourth quarter of 2022

Economy
Published Feb 06, 2022 07:33AM ET Updated Feb 06, 2022 12:30PM ET
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© Reuters. FILE PHOTO: ECB board member Klaas Knot appears at a Dutch parliamentary hearing in The Hague, Netherlands September 23, 2019 REUTERS/Eva Plevier/File Photo

By Toby Sterling and Bart H. Meijer

AMSTERDAM (Reuters) - Klaas Knot, the Dutch central bank president and a member of the European Central Bank's Governing Council, said on Sunday he expects the ECB to raise interest rates in the fourth quarter of this year.

In an interview on Dutch television programme Buitenhof, Knot, known as one of the more hawkish members of the ECB's board, said he supported winding down the euro zone central bank's asset purchasing programme as quickly as possible.

"Personally I expect our first rate increase to take place around the fourth quarter of this year.... Normally we would raise rates by a quarter percentage point, I have no reason to expect we would take a different step." He added that he thought a second hike would likely follow in early 2023.

Knot's remarks come after ECB President Christine Lagarde https://www.reuters.com/business/ecb-seen-hold-may-acknowledge-inflation-risks-2022-02-02 on Thursday opened the door to an interest rate increase in 2022 but said it was "unlikely".

The bank must first end its asset purchasing programmes, currently set to be wound down in steps to 20 billion euros ($22.89 billion) per month by the fourth quarter. However, since Thursday bond markets have begun pricing in around 40 basis points of rate hikes by December.

"The first two rate increases will follow each other quite quickly, as they will take us out of negative territory," Knot said.

"After that, if we don't see a wage-price spiral and inflation expectations remain anchored around our 2% target there is not much reason for us to increase rates significantly and quickly."

Knot said that inflation in the euro zone, at 5.1% in January, was too high, and will probably last into 2023 before receding - assuming there is no further unexpected increase in energy prices.

($1 = 0.8736 euros)

ECB's Knot sees first interest rate hike in fourth quarter of 2022
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Comments (5)
peter neal
peter neal Feb 06, 2022 6:17PM ET
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Bull and hold Gold and wait
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Stop Lost
Stop Lost Feb 06, 2022 3:03PM ET
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seem like their strategy is to kick the can down the road
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Dave Jones
Dave Jones Feb 06, 2022 2:35PM ET
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Real inflation is much higher. Housing power and fuel. Basic essentials.
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Chad RicherThanYou
Chad RicherThanYou Feb 06, 2022 2:34PM ET
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Why wait? Why not do it now? Because they can’t.
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Stan Smith
Stan Smith Feb 06, 2022 12:41PM ET
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Keep Kicking the Can!!!...then it will be the fourth quarter of 2023 ...2024. Always pushing the date till the end of the current year to make it appear its still on the table in 2022.
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