MNI BRIEF: See No ECB Rate Cut Until H2 '24 - DNB's Klaas Knot

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.

November’s inflation data was “good news,” he, said, especially the stronger-than expected decline in core inflation, from 4.2% to 3.6%. However, while the ECB can be confident that returning to 2% in 2025 is a credible prospect, he continued, medium-term risks are still tilted slightly to the upside.

“We have to get inflation to 2% by 2025 - that's crucial,” Knot said. “And a lot has to go well still for that to happen. So we have to remain vigilant."

“It should be recognised that the disinflation path we are assuming in our new projections is based on financial conditions that involve significantly less policy easing than is implied by current market prices. So if current market prices continue to deviate from this path, this in and of itself represents an upside risk to our December inflation outlook,” Knot added.