The European Central Bank, ECB, may need to pursue somewhat more restrictive monetary policy going forward as a result of geopolitical risks and recurring supply disruptions. This is according to former Dutch central bank governor Klaas Knot, who has been identified as a possible successor to ECB President Christine Lagarde, Bloomberg News reports.
Knot believes that inflation may more often come in above the ECB’s 2 percent target than below it. At the same time, he considers the central bank’s current cautious stance appropriate and notes that the spillover effects from higher inflation have so far been limited.
He identifies the wage negotiations in January as particularly important for the inflation outlook.
Knot also believes it is too early to discuss support purchases in the bond market, despite the recent concerns surrounding, among other things, France’s public finances.
