(Bloomberg) -- European Central Bank Governing Council member Klaas Knot said investor bets for interest-rate cuts in January and March are reasonable, while any commitment beyond is difficult due to heightened global uncertainty.
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“I’m pretty comfortable with the market expectations for the upcoming two meetings,” the Dutch central banker told Bloomberg TV’s Francine Lacqua in an interview in Davos, Switzerland, on Wednesday. “Further than that, I find it too early to comment.”
With inflation on track to reach the 2% target in the coming months, officials are prepared to cut borrowing costs by a quarter-point next week, building on four such reductions in 2024. Analysts and traders see the deposit rate falling toward 2% by mid-year, a level they deem neither restrictive nor supportive for economic expansion.
Knot highlighted threats of punitive tariffs as a growth risk, which is already struggling with muted consumer spending. US trade policy is a “clear downside risk on the horizon,” he added.
At the same time, he expressed confidence that the ECB is on track to bring inflation back to 2%.
“The data is encouraging,” Knot said. “It confirms the broad picture that we will return to target in the remainder of the year, and hopefully the economy will also finally recover a bit. There is actually not so much rational reason for consumers to be reluctant to spend in the euro area.”
Knot is among a handful of ECB policymakers attending the World Economic Forum, with President Christine Lagarde scheduled to discuss European competitiveness later Wednesday.
A day earlier, Knot’s French counterpart, Francois Villeroy de Galhau, told Bloomberg TV that there’s a “plausible consensus” within the 26-strong Governing Council that rates will be lowered at each upcoming policy meeting. He played down the possible need to move in larger increments.
Slovak central-bank chief Peter Kazimir sent similar signals, arguing that three to four consecutive cuts are still in the pipeline, including one next week. Bundesbank President Joachim Nagel said in a separate interview that policy may be loosened toward neutral levels by mid-2025.
Knot argued along similar lines.
“We are on a trajectory toward neutral,” he said without offering a specific estimate. “I’m not convinced yet that we need to go into stimulative mode as well.”