(Bloomberg) --
The European Central Bank will likely slow the pace of interest-rate increases once it arrives at a neutral level with bigger hikes in the next few months, Governing Council member Klaas Knot said.
Speaking Saturday at the Group of 30 conference at the International Monetary Fund in Washington, the Dutch central banker said that with upside risks to inflation he's “fully convinced” the ECB needs to do more than just removing stimulus. But once the central bank gets to a level of rates in the next few months that is deemed to neither stimulate nor restrain the economy, it may move more cautiously.
“The further we hike and the closer we get to restoring a credible prospect of inflation moving back to target, the smaller rate steps will likely become,” Knot said.
With rates at neutral, Knot also said that ECB will have to consider shrinking its balance sheet by limiting the reinvestment of maturing assets. That would help transmit tighter monetary policy and ensure all instruments are working in the same direction, but should be done “gradually.”
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
