Dutch central bank president predicts interest rates will begin to fall in June

Interest rates in the eurozone could decrease slightly in June if the numbers show that salary increases did not drive up inflation again, said Klaas Knot, the president of the De Nederlandsche Bank (DNB). Knot did not rule out the possibility of further rate changes this year during the presentation of the central bank's annual report.

Knot said that inflation seems to be falling towards the eurozone goal of two percent. "That means that we are slowly moving towards the point where you can gradually take away some restrictions that you are putting on the economy with the high interest rates," he said. Despite this, the European Central Bank (ECB), where Knot is one of the highest-ranking directors, decided last week to hold interest rates at a historically high level. Knot said that this is due to uncertainty surrounding the rise in salaries.

The fact that wages are currently rising above inflation is "normal," according to Knot. Wages always have a delayed reaction to a sudden increase in inflation. "That is a recovery of purchasing power. And I really want this for the people. But then we do need to make an assessment: Will this lead to a new round of price increase in prices or not?"

Knot pointed out that most European countries were involved in many new collective bargaining agreements negotiations in the first quarter of the year. Whether the wages will continue rising sharply or the increase will be more moderate is unknown at this time. "We will receive the statistics around the beginning or middle of May," Knot added. "As long as nothing strange emerges from those figures, I have penciled in June for the first interest rate cut."

The next moment for interest rates to be able to be reduced further after June is dependent on the data at that time. Knot did say that it is obvious that the ECB will take steps during interest rate meetings when the central bank has new inflation estimates. That will take place around September and December. However, rate decisions could also be made after other meetings.

There is much speculation in the financial markets about how and when the interest rates could decline. The head of the Greek central bank, Yannis Stournaras, shared his prediction on Thursday about the prospect of two interest rate cuts in August and four in total before the end of the year. Knot could not be tempted to make a similar statement. "If you are asking me whether I agree with my colleague, my standard answer is, 'The only person I agree with is myself.'"