Markets are “getting ahead of themselves” with rate cut expectations, the president of the Dutch central bank, Klaas Knot, told CNBC Wednesday.
“The problem for us is that in the end that might become self-defeating. We are optimistic that we have a credible prospect of a return of inflation to 2% in 2025. But a lot still needs to go well for that to happen,” European Central Bank member Knot said, speaking at the World Economic Forum in Davos.
“Underlying that projection is an interest rate path, assumed interest rate path, that contains significantly less easing than is currently embedded in market pricing. So that runs the risk to become self-defeating.”
ECB officials have largely pushed back on market expectations for interest rate cuts starting as soon as the spring.
Austrian central bank head Robert Holzmann, an ECB arch-hawk, told CNBC on Monday that there were threats to the inflationary picture that could mean rates do not move lower at all this year.
This is a developing story. Please check back for updates.