Knot said headline inflation had likely peaked and may come
down faster than the ECB predicted in its December projections,
courtesy of cheaper energy.
He expected inflation in core goods to start falling too,
also thanks to easing supply constraints.
But he warned that inflation in core services may prove
sticker and may get a further boost from rising wages.
"Forward-looking wage indicators confirm that wage growth
will increase further in 2023," Knot said.
He expected workers to gain more bargaining power in salary
negotiations as the economy holds up better than the ECB
expected only a few weeks ago.
"The slowdown in growth seems to be even more shallow and
short-lived than we had expected...with probably no recession in
this 2022-23 winter – not even a technical one," Knot said.
(Reporting By Francesco Canepa; Editing by Christina Fincher)
(Adds detail)
FRANKFURT, Feb 8 (Reuters) - The European Central Bank
may extend its streak of large interest hikes into May if core
inflation doesn't ease by then, ECB policymaker Klaas Knot said
on Wednesday.
The ECB raised interest rates by half a percentage point
last week and pencilled in a move of the same magnitude for next
month but kept options open for its following meeting in May,
with sources telling Reuters they expected a 25- or 50-
basis-point increase then.
Knot, the Dutch central bank governor and a leading policy
hawk, said the ECB should only decrease the pace of rate hikes
once it sees underlying inflation, which strips out energy and
food prices, abate.
"If underlying inflation pressures do not materially abate,
maintaining the current pace of hikes into May could well remain
warranted," he told an online event organised by MNI Market
News.
"Once we see a clear and decisive turn in underlying
inflation dynamics, I...expect us to move to smaller steps."
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