MNI BRIEF: Rate Cuts To Neutral If Inflation At Target - Knot
MNI (BRUSSELS) - Dutch National Bank President Klaas Knot said Wednesday that if inflation returns to its 2% target next year the ECB can continue to cut rates until they reach their neutral level.
"We are pretty confident about the return of inflation to our 2% target somewhere in the course of next year. I would also say that I see the risks surrounding that baseline reasonably contained I would say," Knot, a member of the ECB's Governing Council said..
"So, if that scenario indeed plays out and if the December projections also confirm that scenario, that would allow us to gradually take our foot off the brake and continue to cut rates until we will, let's say, have reached neutral territory," Knot told CNBC.
Asked what would it take for the ECB to accelerate rate cuts maybe with 50bp rather than 25bp reductions, Knot said the ECB would need to see evidence of a "structural undershoot of inflation" which would require evidence of "quite some deterioration in the data".