(Bloomberg) -- European Central Bank Governing Council member Klaas Knot said he’s comfortable with investor bets on further interest-rate cuts.
Markets see one or two additional quarter-point moves in 2024, with borrowing costs settling at 2% after six more next year. Knot told an event in Istanbul that he sees room for the ECB to continue easing monetary policy — assuming inflation cools as projected.
“As long as that’s the case, I’m more or less fine with market expectations of further cuts,” the hawkish Dutch official said Thursday. “I’m not going to tell you how much and when because we’re data-dependent and we should be data-dependent.”
The ECB lowered borrowing costs for the second time this year a week ago, to 3.5%, with policymakers signaling in the days after that another quick-fire move in October is unlikely without a severe deterioration in the euro zone’s economy.
As inflation approaches the 2% target, most are sticking with preferences to only loosen monetary policy gradually, which has so far meant each quarter. That would mean a final reduction in 2024 in December.
Knot described the balance of risks as “more or less neutral at this moment in time.”
“Following the current path we’re on is a path that gives us two-sided optionality,” he said. “If services inflation proves to be more stubborn than we think, of course there will be less room for rate cuts. If, on the other hand, the economy continues to be weak then there’s room for more cuts.”
--With assistance from James Hirai.
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