Klaas Knot, chairman of De Nederlandsche Bank spoke to CNBC in Davos.
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DAVOS, Switzerland — The European Central Bank won’t stop at a single 50 basis point hike in its upcoming rate-setting meetings, a board member told CNBC on Thursday.
“It won’t stop after just one 50 basis point hike, that’s for sure,” Klaas Knot, who is governor of the Dutch central bank, said of the ECB’s next steps.
The European Central Bank raised rates four times in 2022, bringing its deposit rate to 2%. The central bank said in December that it would raise rates further in 2023 to deal with soaring inflation.
Recent data has shown a slowdown in headline inflation, although it remains well above the ECB’s 2% target.
December inflation stood at 9.2% in the euro zone, according to provisional figures. This is the second consecutive monthly decline in price inflation in the euro zone. However, Knot doesn’t think all the recent 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 reading of inflation where there was no sign of a slowdown in [the] underlying inflationary pressures. So we have to do what we have to do, and core inflation has not yet turned the corner in the eurozone and that means the market developments that I have seen, say, in the last couple of weeks are not entirely welcomed by my perseption. I don’t think they are actually compatible with a temporary return of inflation towards 2%,” Knot said.
Market participants expect the ECB to hike rates at its next meeting in February. The larger question is whether the central bank is getting too aggressive with its tightening policy and limiting economic growth. However, Know made it clear that there would be at least two more rate hikes.
“Most of the ground that we need to cover, we will cover at a consistent rate of multiple 50 basis point hikes,” he said.
“I can’t say in advance where this kind of 50 basis point hike is going to stop, but it’s very clear that our president used the plural in her remarks, I’m using the plural here. So that won’t stop after a one-time 50 bps hike, that’s for sure.”