ECB First Rate Hike: Is Now A Possibility By 4th Quarter, 2022 - Says Knot Of Netherlands

February 6, 2022

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 programme Buitenhof, Knot, known as one of the more hawkish members of the ECB's board, said he supported winding down the eurozone 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.

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, a change from her previous stance that it was "unlikely".

On Thursday Lagarde said the bank would not be rushed into a rate hike decision but did not explicitly rule out the possibility of a 2022 hike. "We will continue to observe the sequence we have agreed and we will be gradual in any determination we make," she said.

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 per cent after years in negative territory.

SOURCE: REUTERS
IMAGE SOURCE: PIXABAY

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