ECB Official Expects Half-Point Hikes at Next Two Meetings

Dutch central bank chief Klaas Knot, a Governing Council member of the European Central Bank (ECB), has said the central bank will carry on with half-point interest-rate increases at the next two meetings.

In a recent interview, Knot said the time to slow the pace of hikes is “still far away,” adding that, at some point in the first half of the year, risks to the inflation outlook will become clearer. Only then would the ECB be able to alter its policy response, if required.

In a sign of an increasingly hawkish approach, many ECB members are making the case for continued tightening in coming meetings, arguing that underlying inflation is still rising, even as headline inflation measures suggest it is slowing. 

In 2022, ECB policymakers raised the deposit rate by 250 basis points to 2% and analysts see rates peaking at 3.25% by the coming summer. That said, a minority of officials are considering slowing the pace of tightening as price pressures ease and energy costs drop.

Knot is not alone in his pushback against reducing the rates of interest rate hikes too quickly. ECB President Christine Lagarde recently told the World Economic Forum in Davos that policy makers would “stay the course.” Central bank chiefs of Austria and Finland made a similar case in recent days, a far cry from the ECB’s early dovish stance that saw it lose crucial ground in the fight against high inflation.