(Bloomberg) -- European Central Bank Governing Council member Klaas Knot said he’s upbeat on the prospects for the region’s economy as inflation moderates and borrowing costs fall.
The recent period of sluggish growth was due to monetary-policy tightening aimed at wresting back control over consumer prices, the Dutch official said Thursday. He described rising confidence that inflation will sustainably meet the 2% target.
“The outlook for the euro area is not as bad as people make you believe, but not great either,” Knot told an event in Amsterdam. “There should be a recovery in consumption around the corner.”
ECB officials are gearing up for their final policy meeting of 2024 next month, with investors viewing a fourth quarter-point cut in the deposit rate as the likeliest outcome. That would reflect the slowdown inflation, which met the 2% target in October, as well as concerns that the region’s economy is faltering.
Policymakers must also now factor in the return of Donald Trump to the US presidency — particularly the hefty tariffs he’s threatened to slap on imports into America. Speaking shortly after Trump’s election victory was confirmed on Wednesday, ECB Vice President Luis de Guindos warned of “huge” effects if the trade levies materialize.
Knot also highlighted the downsides of erecting barriers to international commerce.
“That will provide a whole set of new risks,” he said. “It will lead to a more difficult diffusion of new technology, it will have a negative impact on productivity growth and it will also negatively impact our capacity to come together and jointly solve global problems.”
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