ECB: Half-point rate hike in September not the only option, says Knot


PARIS (Reuters) – The European Central Bank (ECB) is due to raise interest rates by more than a quarter point in July and a hike of half a point in September is not the only option, a said Klaas Knot, member of the board of governors of the Frankfurt institute.

“If conditions remain the same as today, we will have to raise the rate by more than 0.25 points. The next level is to raise by 0.5 points, but our options are not necessarily limited to that” , he said in an interview published by Le Monde on Tuesday.

The ECB announced last week that it was ending its policy of buying bonds on the markets and planning to raise its interest rates in July by 25 basis points, the first rise since 2011, while not excluding a larger increase in September if inflation does not slow.

Asked if a three-quarter point hike was possible all at once, Klaas Knot, also president of the Dutch central bank, said: “All I can say is that the hike will have to be higher at 0.25 points.”

“It all depends on the data and the economic situation, but there is a real probability that the rates will continue to rise in October and December,” he added.

Such a rate of increase could bring the ECB’s deposit rate, currently at -0.5%, down to 1% by the end of the year, with Klaas Knot deeming it urgent to act in the face of inflation above 8% in the euro zone.

“We are particularly worried about the fact that inflation is spreading to the entire consumer basket. Now, 75% of the prices we measure are increasing by more than 2%,” he explained, noting that the Core inflation (excluding energy and food) is now 3.8%, against a target of 2%.

(Written by Claude Chendjou, with contributions from Sudip Kar-Gupta and Tassilo Hummel, edited by Sophie Louet)



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