ECB’s Knot Sees Gradual Rate Cuts Through First Half of 2025

By Cagan Koc

September 24, 2024 at 5:27PM EDT

Klaas Knot, president of De Nederlandsche Bank NV, speaks during a Bloomberg Television interview on the sidelines of the Group of 20 (G-20) finance ministers and central bank governors meeting in Gandhinagar, India, on Tuesday, July 18, 2023. Group of 20 finance ministers and central bank governors conclude a two-day gathering Tuesday, with participants haggling over debt relief for stressed developing nations and how to reform multilateral development banks and encourage sustainable finance. (Dhiraj Singh/Bloomberg)

(Bloomberg) -- European Central Bank Governing Council member Klaas Knot said he expects gradual interest-rate cuts “in the near future” and in the first half of next year.

“I don’t expect interest rates to return to the extremely low levels we saw before the pandemic,” Knot said Tuesday on Dutch television program Nieuwsuur on NPO2. The hawkish Dutch central bank chief said he sees rates settling “at a more natural level” somewhere in the 2% range.

Knot’s remarks come after the ECB lowered borrowing costs for the second time this year earlier this month, to 3.5%. Some policymakers have already signaled that another rate cut in October is unlikely without a severe deterioration in the euro zone’s economy.

Markets are betting on another move in December and are about evenly split on the odds of a rate cut next month. Knot said last week that he is comfortable with investor bets on further cuts.

“Interest rates in Europe will simply keep falling as we become more and more convinced that the 2% inflation target is within reach,” Knot said Tuesday, adding that he doesn’t yet know when exactly the reductions will stop.