(Bloomberg) — Consumer-price growth returning to the European Central Bank’s target will allow policymakers to stop restricting economic growth via its interest rates, according to Governing Council member Klaas Knot.
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“Our monetary policy is still inhibiting economic activity right now,” he said in an interview on Dutch state broadcaster NPO1 on Sunday. “But when we are back at 2% inflation, that is no longer necessary, so gradually we are taking our foot off the brake, and trying to aim for the moment when we have recovered 2%.”
Speaking on the Buitenhof TV program, Knot — who’s among the more hawkish rate setters — said that “inflation is well on track to return to the desired 2% later this year.”
The ECB last week cut for the fifth time in this cycle, lowering the deposit rate by a quarter-point step so 2.75%. Another such move looks very likely at the next meeting in March, though economists are split on what’s next after that.
Knot spoke the day after US President Donald Trump followed through on pledges to impose 25% tariffs on imports of Mexican and Canadian goods, and 10% on those from China, instigating a trade war that’s set to reshape global supply chains.
Trump has warned the European Union that it’s in his crosshairs, too, saying again last week that his administration “will be doing something very substantial” when it comes to tariffs on the bloc.
“The EU won’t let itself be walked over” by the US on tariffs, Knot said on Sunday, highlighting that it’s a “powerful trading bloc, with 400 million consumers.”
“I think we need to make the EU stronger and more competitive” he said.
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