Friday, February 23

ECB’s Knot sees first interest rate hike in fourth quarter of 2022

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AMSTERDAM — Klaas Knot, the Dutch Central Bank President and a member of the European Central Bank’s governing council, said on Sunday he expects the ECB to raise interest rates in the fourth quarter of this year.

In an interview on Dutch television program Buitenhof, Knot, known as one of the more hawkish members of the ECB’s board, said he supported winding down the euro zone central bank’s asset purchasing program as quickly as possible.

“Personally I expect our first rate increase to take place around the fourth quarter of this year…. Normally we would raise rates by a quarter percentage point, I have no reason to expect we would take a different step.” He added that a second rate hike would follow the first one in short order, likely in the first quarter of 2023.

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Knot’s remarks follow those by ECB President Christine Lagarde on Thursday in which she opened the door to an interest rate increase in 2022 but said it was “unlikely.”

The bank must first end its asset purchasing programs, currently set to be wound down in steps to 20 billion euros per month by the fourth quarter. However, since Thursday bond markets have begun pricing in around 40 basis points of rate hikes by December.

Such a move would put the ECB’s deposit rate not far below zero percent after years in negative territory. (Reporting by Toby Sterling; Editing by Toby Chopra)