Central Banks
ECB Must Take Close Look at Supply Shocks to Economy, Knot Says
- React forecefully only if risk of expectations de-anchoring
- Dutch central-bank chief speaks at conference in Paris
Klaas Knot
Photographer: Kent Nishimura/BloombergThis article is for subscribers only.
The European Central Bank can ignore supply shocks that push up prices as long as inflation expectations hold steady, but should react forcefully if there’s a danger of them deviating excessively, Governing Council member Klaas Knot said.
“It may be optimal for monetary policy to look beyond temporary supply shocks as long as inflation expectations remain anchored, but to pivot aggressively once the risk of de-anchoring rises,” he said Thursday.