ECB's Knot: Inflation Return to Target Will Allow for Monetary Policy Easing
Klaas Knot, a member of the Governing Council of the European Central Bank (ECB), has stated that the return of consumer-price growth to the ECB's 2% target will enable policymakers to cease constraining economic growth through interest rate restrictions.
Knot emphasized in an interview with Dutch state broadcaster NPO1 that the bank's current monetary policy is hindering economic activity but will be relaxed once inflation reaches 2%. He expressed confidence in inflation's trajectory, stating that it is on track to return to the desired level later this year.
The ECB recently cut interest rates for the fifth time in this cycle, lowering the deposit rate by 0.25% to 2.75%. A further cut is anticipated at the upcoming March meeting, although economists remain divided on the subsequent course of action.
Knot's comments come in the wake of US President Donald Trump's imposition of tariffs on goods imported from Mexico, Canada, and China, sparking a trade war that has the potential to alter global supply chains. Trump has also threatened to target the European Union with tariffs.
Knot stressed that the EU will not tolerate US tariff aggression, highlighting its strength as a trading bloc with 400 million consumers. He advocated for strengthening and enhancing the EU's competitiveness in response to the trade challenges.