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De Nederlandsche Bank
De Nederlandsche Bank - Credit: Photo: Kaihsu/Wikimedia Commons
Business
Klaas Knot
DNB
ECB
inflation
bond buying program
Friday, September 13, 2019 - 14:10
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Dutch central bank boss denounces new ECB measures

Klaas Knot, president of Dutch central bank DNB, explicitly denounced a new package of measures announced by the European Central Bank on Thursday. He called the measures "disproportionate to current economic conditions" and questioned their effectiveness in a press release on Friday.

The measures announced by the ECB on Thursday include lowering the deposit interest rate, measures to make a bigger distinction between different interest rates for banks, and restarting te bond purchasing program. The ECB believes these policy measures are necessary to reach its target of nearly 2 percent inflation in the euro zone.

Knot is also a member of the ECB's governing council and was present when the measures were announced. "This broad package of measures, and in particular the restarting of the bond buying program, is disproportionate to current economic conditions, and there are good reasons to question its effectiveness", he said on Friday.

According to Knot, the economy in Europe is running at full capacity, wages are rising, and citizens, companies and governments have a broad range of financing options. "At the same time there are increasing sings of a lack of investments with a low-risk profile, distorted pricing on financial markets, and excessive risk-seeking behavior in housing markets." 

"Due to the economic slowdown, it is inevitable that it will take longer for the ECB to achieve its inflation target of below but close to 2 percent, but that does not meant that the target has disappeared. There is also no risk of deflation, nor indications of a euro area-wide recession", Knot said. "The only thing that is perceptible at the moment is that the inflation outlook is lagging behind the ECB target, which is worrying, but does not mean that the restart of a serious measure such as the purchase program is the appropriate instrument."

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