FRANKFURT (Reuters) - The European Central Bank should take its time in raising interest rates, Dutch central bank chief Klaas Knot told the Financial Times, an apparent shift in tone for one of the most outspoken hawks on the rate-setting Governing Council.
With euro zone growth slowing sharply, some policymakers have warned that the ECB should slow down in removing stimulus and the cautious tone by Knot suggest that the ECB is almost certain to formally delay a rate hike, still officially slated for late 2019.
Knot, sometimes mentioned as a potential candidate to succeed ECB President Mario Draghi later this year, said there was no need to raise rates until there were more signs that inflation was rising toward the ECB’s target of just below 2 percent.
“We will have to be patient and also, in my view, modest with respect to the precise moment at which we can expect inflation to converge toward our medium-term objective,” the FT quoted Knot as saying on Tuesday.
“At this moment a wait-and-see attitude is probably the optimal attitude.”
Still, he added that any talk of a euro zone recession was premature.
“The current situation might last a few quarters, but I’m still positive . . . that afterwards growth will return to levels slightly above potential again,” Knot was quoted as saying.
The ECB, which ended a 2.6 trillion crisis-era bond purchase scheme in December, has long guided for steady rates through the summer.
Markets have however pushed back rate hike expectations to mid-2020 from late 2019 as a steady stream of dismal growth figures point to a sharply slowdown in growth, making big downward revisions in ECB projections a foregone conclusion.
Reporting by Balazs Koranyi; Editing by Alison Williams