Klaas Knot, Dutch Central Bank President and European Central Bank Governing Council member, hinted that despite the retreat of inflation from the peak level, the ECB does not yet see any reason to end the cycle of tightening monetary policy.
The final data, published by Eurostat, showed that consumer price growth accelerated in October, but was weaker than economists' forecasts and preliminary estimates. According to the report, the consumer price index rose by 10.6% per year after an increase by 9.9% in September. Economists had expected the CPI to rise in line with the preliminary estimate (+10,7%). Meanwhile, on a monthly basis, the consumer price index rose by 1.5% after rising by 1.2% in September. Eurostat reported that the core consumer price index - excluding energy, food, alcohol and tobacco - rose by 5.0% per year, as expected, after an increase by 4.8% per year in September. The ECB wants to keep inflation at 2% over the medium term and has been sharply raising interest rates since July to help curb price growth.
Klaas Knot said that although the ECB expects CPI growth to slow to the target level in 2024, the risks to the forecast "are entirely tilted to the upside." He also called any talk of excessive tightening of monetary policy at this stage "something like a joke."
"To bring inflation back to 2%, we will need a long period of time during which, at least, economic growth will be below potential, because otherwise we will never achieve a reduction in inflation," Knot said, adding that the biggest danger lies in declaring victory over inflation too early and easing off on monetary-policy tightening before the job is done.