FRANKFURT, Dec. 30 (Reuters) – The European Central Bank (ECB) is close to hitting its 2% inflation target and could end stimulus measures faster than expected if prices continue to surprise at the rise, said Klaas Knot, a member of the institution’s Board of Governors.
The ECB announced two weeks ago a slowdown in exceptional support measures but promised to keep rates low in 2022 and did not rule out relaunching certain emergency measures if necessary.
It has decided to end bond purchases on the markets as part of the Pandemic Emergency Plan next March, but it will temporarily double purchases of the APP device in order to ensure a smooth transition.
“You could say that we are very, very close to ‘mission accomplished’,” Klaas Knot told the German daily Börsen-Zeitung.
“The risks for inflation are clearly on the upside,” he added, however.
Although several conservative ECB leaders opposed the decision to extend certain stimulus measures, Klaas Knot, who has repeatedly criticized the institution’s accommodative policy, said he was “comfortable” with the strategy. aiming to gradually reduce bond purchases in 2022.
But he also cautioned against complacency, arguing that if inflation turns out to be higher than expected, the ECB may need to ease its support measures faster.
“If we want a gradual and smooth exit, then it’s even more important that we start early,” Klaas Knot argued.
“The last thing you want in such a situation is to go ‘behind the curve’ [être en retard sur le cycle économique-NDLR]. Once you’ve fallen behind, you need a brutal correction, in the form of a shock, to get back to the top, “he added. (Report Balazs Koranyi, French version Laetitia Volga, edited by Sophie Louet)