AMSTERDAM (Reuters) – Price pressures in the euro zone continue to ease, increasing confidence among European Central Bank (ECB) officials that inflation will return to its target level next year, Dutch central bank president Klaas Knot said on Tuesday.
The ECB has suggested that it will reduce its key rates, currently at record levels, in June but nothing is certain especially as the American Federal Reserve (Fed) now seems less inclined to ease its monetary policy before the autumn.
Speaking at a banking event in Amsterdam, Klaas Knot said it would be appropriate for the ECB to start lifting some monetary restrictions if growth and price developments remain on their current trajectory.
“If we manage to continue on this path and the incoming data continues to validate this development, then it will be appropriate for us to gradually take our foot off the brake and withdraw part of the restrictive monetary policy,” he said. .
He noted, however, that wage growth was slowing, but so was productivity growth, meaning costs for businesses were not falling.
“Probably next week we will have another negative number on productivity growth,” he said.
Present alongside Jerome Powell, Fed Chairman Klaas Knot downplayed the effect of the Fed’s decisions on the ECB, saying a weaker euro could be offset by higher bond yields.
“I don’t think it will change the direction of the course in the eurozone that much,” he said.
(Reporting Toby Sterling and Bart Meijer; writing by Balazs Koranyi and Francesco Canepa; Claude Chendjou, editing by Kate Entringer)
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