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ECB’s Knot: high inflation could warrant rate hike in 2023 – Metro US

ECB’s Knot: high inflation could warrant rate hike in 2023

FILE PHOTO: ECB board member Knot appears at a Dutch
FILE PHOTO: ECB board member Knot appears at a Dutch parliamentary hearing in The Hague

AMSTERDAM (Reuters) -If inflation continues to exceed expectations next year, the European Central Bank (ECB) could decide to raise interest rates in 2023, ECB policymaker Klaas Knot said in an interview published on Friday.

“I cannot rule out an interest rate hike in 2023, if inflation continues to be higher than our base case scenario in 2022”, the head of the Dutch central bank told newspaper het Financieele Dagblad.

“But we still consider the elevated inflation to be largely a temporary phenomenon.”

Inflation in the 19-country currency bloc soared to a record-high 4.9% last month, more than twice the ECB’s 2% target, and indicators suggest that it will only fall below that mark in late 2022 at the earliest.

The topic of high inflation will likely dominate the ECB’s upcoming policy meeting, on Dec 16, where policymakers are likely to end a 1.85 trillion euro emergency stimulus scheme, but could consider replacing it by ramping up other support measures.

The bank’s policy guidance stipulates that any interest rate increase would only come “shortly after” quantitative easing ends.

(Reporting by Bart Meijer; editing by John Stonestreet)

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