The accelerating rate of price level growth in the euro area is already beginning to worry the members of the European Central Bank’s management. According to Klaas Knot, President of the Central Bank of the Netherlands and member of the ECB’s Governing Council, raising interest rates is in sight.
“Personally, I expect the first interest rate hike to take place sometime in the fourth quarter of this year,” Klaas Knot said in an interview with Dutch television station VPRO. Knot also hinted at how drastic the rate hike could be. “Normally, we raise rates by a quarter of a percentage point. I have no reason to expect it to be any different this time,” he added.
According to Knot, it is also likely that a second rate hike will come immediately, during the first quarter of 2023. Klaas Knot is a so-called “hawk” in the ECB’s Governing Council. That is, a central banker who emphasizes keeping inflation in check. He was also one of the members of the European Central Bank’s management who openly supported ending quantitative easing as soon as possible.
By contrast, ECB President Christine Lagarde has long called for monetary policy tightening not to happen too quickly and hastily.