Dutch Central Bank Governor: "ECB Expected to Raise Interest Rates from Q4 This Year"...Countries Accelerate Rate Hikes

Zero Interest Rates Expected to End Within the Year Since 2016
Mexico and Russia Also Signal Additional Base Rate Hikes

[Image source=EPA Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Klaas Knot, President of the Netherlands Central Bank and Executive Board Member of the European Central Bank (ECB), officially announced that the ECB is expected to start raising interest rates in the fourth quarter of this year. The ECB, which has maintained a 'zero interest rate' policy since 2016, is signaling a rate hike within the year, and it is anticipated that the pace of interest rate hikes by major central banks will accelerate.

On the 6th (local time), President Knot appeared on the Dutch current affairs program Buitenhof and stated, "I expect the ECB to begin raising interest rates by 0.25 percentage points as early as the fourth quarter of this year," adding, "The second rate hike will take place in the spring of next year." This is the first time an ECB Executive Board Member has directly announced expectations of a rate hike within the year. If the ECB begins raising rates within the year as he predicts, it will be the first increase in 10 years since the fourth quarter of 2011.

Among the ECB Executive Board Members, Knot, known as a so-called 'hawk,' has consistently advocated for a shift to tightening policies to curb excessive inflation. President Knot emphasized, "Unlike the United States, most European Union (EU) countries are experiencing price increases due to external factors, and they will suffer from inflation above 4% throughout this year," adding, "There is not much that can be done to solve this problem."

Following the Federal Reserve's (Fed) indication of a rate hike in March, the ECB's forecast of a rate increase within the year has prompted central banks worldwide to hasten their rate hikes. According to the BBC, on the 3rd, the Bank of England (BOE) raised its key interest rate to 0.5%, marking its second rate hike since December last year.

The Bank of Canada (BOC) also announced on the 26th of last month during its monetary policy meeting that it would abandon its forward guidance to maintain the current key interest rate of 0.25% through the first half of this year, suggesting an imminent rate hike.

According to Bloomberg News, Mexico, which has a monetary policy meeting scheduled for the 10th, plans to raise its current key interest rate of 5.5% by an additional 0.5 percentage points. Mexico has already raised its key interest rate five times since June last year. The Central Bank of Russia, which will announce its monetary policy on the 11th, is also expected to raise its current key interest rate of 8.5% by an additional 1 percentage point. Russia has consecutively raised its key interest rate seven times since February last year.

Some emerging countries severely affected by inflation due to the COVID-19 pandemic have already begun steep interest rate hikes since last year. Brazil, which has raised rates eight times since March last year, increased its key interest rate to 10.75%. Chile also raised its key interest rate by 1.5 percentage points at its monetary policy meeting on the 26th of last month, from 4% to 5.5%, marking the largest increase in 20 years.

This content was produced with the assistance of AI translation services.