European Central Bank Governing Council member Klaas Knot said inflation shocks are now in retreat, though officials stand ready to step in again if reaching the 2% goal moves further into the future.
(Bloomberg) — European Central Bank Governing Council member Klaas Knot said inflation shocks are now in retreat, though officials stand ready to step in again if reaching the 2% goal moves further into the future.
“The effects of these shocks are now gradually waning,” Knot said Wednesday in Marrakech, where he’s attending annual meetings of the International Monetary Fund and World Bank. “We have to monitor, there will be new shocks.”
Consumer-price growth has slowed to 4.3% from more than 10% in October 2022, though the ECB’s latest projections only see it reaching target in the second half of 2025.
Doing so that year “would be an acceptable return for me,” Knot said, adding that “at the moment, I’m getting a little bit more confident in our projections again, because these unprecedented shocks that made our models a bit obsolete and the output of the models less reliable than would normally be the case, these shocks are waning.”
The ECB has raised rates for 10 consecutive meetings and has signaled that no further move is likely at its Oct. 26 meeting. Some policymakers have indicated that they think the peak in tightening has now been reached, while others refuse to exclude the possibility of more action.
“Of course, we’re open to the realization that disinflation processes never take place in a sort of linear fashion and there may be new shocks ahead of us,” he said. “In such a case, we will remain vigilant and we will stand ready to adjust interest rates even more if the disinflation process were to stall as the risks of prolonged wage growth and further second round effects of course remain.”
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