In an interview with the Irish Times, Dutch central banker Klaas Knot said he is “not uncomfortable” with market predictions of interest rates rising to 3.85% from 3%.
According to Reuters, the ECB is expected to raise rates for a seventh straight meeting on May 4 to lower stubbornly high euro zone inflation, with policymakers converging on a 25-basis-point hike.
Policy rates are slightly restrictive, but inflation is not. “Inflation is still too high,” he told the newspaper on Thursday.
“Mildly restricted area will not be enough to counter an underlying inflation rate that is moving up towards 6%. We need enough restriction. I don’t know where is adequately limiting, but definitely not now.”
While euro zone inflation dropped last month, core inflation remains high at 5.7%, worrying Frankfurt about pricing pressures.
“A pause is premature. “I need a convincing reversal in underlying inflation dynamics for a pause,” Knot said.
ECB policymakers expect underlying price inflation to accelerate for many months before plateauing, and a major decrease may not occur until autumn.
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