ECB Governing Council member Klaas Knot. — Bloomberg
Frankfurt: European Central Bank (ECB) Governing Council member Klaas Knot says 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 in an interview on Dutch television programme Nieuwsuur on NPO2.
The hawkish Dutch central bank chief said he expects 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 signalled that another rate cut in October is unlikely without a severe deterioration in the eurozone’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 last Tuesday, adding that he doesn’t yet know when exactly the reductions will stop. — Bloomberg
