Dutch central bank Governor Klaas Knot expects the euro zone economy to recover speed in the second half after a sluggish start to the year, but in an interview with Handelsblatt the noted hawk was distinctly dovish on long-term interest rates.
“It is clear that there has been a cooling off,” he said of the slack start to the year. “But there is no recession or crisis,” he said, adding that robust demand and rising wages suggested growth would soon pick up again.He also repeated his skepticism about multi-tiered deposit rates to help well-capitalized banks with excess liquidity, saying he would need to see clear evidence that negative interest rates were hurting lending to the real economy.
“I see the news program, TLTRO III, as a bridge … to ease the transition to market financing,” he said. “The new program’s conditions will be less advantageous than before… We should avoid us needing to discuss a TLRO IV or V in a few years’ time.”