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Knot Sees No ECB Rate Cut Until H2 '24

ECB

The ECB is “rather unlikely” to cut interest rates in the first half of 2024, DNB governor Klaas Knot said in an interview with Boersen-Zeitung Wednesday, with policymakers needing to see how wages develop before they can conclude that inflation has turned the corner durably.

Key passages of the interview below:

  • “The latest inflation figures were a very welcome confirmation that we are on the right track to bring inflation back down to the target level of 2%. But we have to wait and see how wages develop before we can say that inflation has also turned the corner durably. Our projections are based on a clear deceleration in wage growth and profit margins in 2024.”
  • On rate cuts in 1H24: “Based on the information available today, I think it is rather unlikely
  • On the increasing amount of rate cuts being priced in: “I can assure you that the optimal monetary policy path that emerges from these simulations is much closer to the policy rates that were priced in at the cut-off date of our projections than to the policy rate path that is priced in on the financial markets today - after the November inflation data.”
  • On the claim that the ECB has gone too far re rate hikes: “Given the inflation outlook and how I see the risk balance, I beg to differ.”
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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