ECB’s Knot supports near-term rate cuts, not convinced of of stimulus mode

Dutch ECB Governing Council member Klaas Knot expressed agreement with market expectations for rate cuts at the January and March meetings, saying he is “pretty comfortable” with them. However, he added it is “too early to comment” on further cuts beyond March.

“As long as the incoming data is in line with our projected return of inflation to target later this year then I think there is little obstacle to making another rate cut,” Knot said. “To change my mind for next week, it’s rather unlikely.”

Knot reiterated ECB’s trajectory toward a neutral policy stance. But he emphasized, “I’m not convinced yet that we need to go into stimulative mode as well.”

He expressed optimism that recent inflation data is “encouraging”. “It confirms the broad picture that we will return to target in the remainder of the year, and hopefully the economy will also finally recover a bit,” he added.

However, Knot flagged risks posed by US trade policies, describing punitive tariffs as a “clear downside risk on the horizon.”