(Bloomberg) — Investor expectations for the European Central Bank to loosen monetary policy once or twice more this year are fair as long as inflation and economic growth develop as expected, Governing Council member Klaas Knot said.

If quarterly data on wages, profits and productivity are in line with the ECB’s latest projections, “I am perfectly fine with our policy stance and with current market expectations of future rate cuts,” Knot told Handelsblatt in an interview published Monday.

While the Dutch central-bank governor sees disinflation “well entrenched and underway,” he said officials “have to remain vigilant because upside inflation risks remain.”

The remarks by Knot, one of the Governing Council’s more hawkish members, place him among a growing group of policymakers endorsing current market expectations for rates in 2024.

The ECB last month lowered borrowing costs for the first time since an unprecedented barrage of hikes to quell record inflation. It was cautious on next steps, though, amid high uncertainty on the consumer-price outlook.

Knot said he’s “comfortable with the progress.” Inflation slowed to 2.5% in June – after surprising with a stronger-than-expected advance to 2.6% in May.

“We should not be thrown off our medium-term orientation if inflation comes in a bit higher than expected in some months to come,” Knot said. The ECB expects it to return to the 2% target in the final quarter of 2025.

“If we were to face renewed setbacks on that trajectory, we would have to be even more patient relative to what markets are currently pricing,” he said, citing the labor market among the biggest dangers to prices.

Knot made clear that he doesn’t see a case for another cut this month. “The next meeting that will truly be open again will be in September,” he said.

As long as rates are above 3%, ECB policy will remain restrictive, he said — “and that will be the case for the foreseeable future.”

Knot also said it’s “high time” for governments to consolidate public finances. “If fiscal policy cannot be kept in check, we have to maintain higher interest rates than we would otherwise have to,” he said.

©2024 Bloomberg L.P.

The post ECB’s Knot Is ‘Fine’ With Rate-Cut Expectations: Handelsblatt appeared first on Bloomberg.