ECB can end bond purchases sooner if inflation surprises persist

European Central Bank governing council member and Dutch central bank head Klaas Knot said on Thursday that the bank could end its bond-buying programmes sooner if inflation continues to surprise on the upside.

Knot added that it is now appropriate for the bank to prepare for gradual monetary policy normalization and that the ECB is close to “mission accomplished” on inflation.

Knot is a known hawkish voice and was one of the ECB members pushing for a greater acknowledgment of upside inflation risks at the last meeting, therefore, the Euro has not seen big reaction to the latest comments.

Inflation in the Eurozone could very well exceed the European Central Bank’s (ECB) current projections for the coming years, ECB governing council member Klaas Knot said in an interview published on Thursday.

The ECB this month projected inflation in the monetary union to fall to 1.8% after 2022, but Knot said that outlook could prove to be too rosy.

“I have a different view, I think the chance we remain stuck above 2% is just as big. Not far above 2%, but still,” Knot told Dutch daily Trouw.

Knot earlier this month said the ECB could decide to raise interest rates in 2023, if inflation continues to exceed expectations next year.