MNI BRIEF: Uncertainty Over ECB Tightening Effects - Knot

The effects of European Central Bank rate hikes are made more uncertain by the fact that such tightening has not been experienced for many years, Dutch central bank president Klaas Knot told an MNI Webcast, adding that a period of sub-potential growth will be necessary for the eurozone in order to suppress excessive inflation.

"The jury is still out on how this tightening is going to impact on growth and inflation," Knot said, noting that at some point during the year this will tilt the balance of risk, which currently indicates the danger of doing too little outweighs that of doing too much.

While the eurozone economy has proven more resilient than feared, with even a technical recession likely to be avoided, at some point growth will have to be below potential in order to comply with inflation objectives, he added.