THE European Central Bank can gradually lower interest rates if inflation continues to fall but more data is needed before a September cut can be decided, Dutch policymaker Klaas Knot said on Tuesday (Aug 27).
With the next policy meeting just two weeks away, a growing number of ECB policymakers are lining up behind another rate cut in September and many say that the real debate is about whether to follow up that move with another cut in October.
Knot, a moderate conservative on the 26-member Governing Council, took a more measured view, however, and said that deal was not yet done, even if there may be a case for gradually easier policy.
“As long as our disinflation path still converges to a return to 2 per cent inflation at or before the end of 2025, then I’m comfortable with gradually taking our foot off the brake,” Knot told a conference panel.
“I will have to wait until I have the full data and information set going into that meeting to decide my position on whether September is appropriate,” Knot added. “I would have to do so again in October, December and whenever.”
Knot in the past made the case for cuts in September and December, or when the ECB releases fresh economic projections if inflation continues to fall.
Markets have now fully priced in a cut next month and at least one more move later this year.
Inflation rose to 2.6 per cent in July, but was seen falling to 2.2 per cent this month and most policymakers speaking on and off record argue that price growth trends are broadly in line with the ECB’s own projections. REUTERS
