WASHINGTON (Reuters) –
Inflation in the euro zone may fall faster than anticipated in the near term, dragged down by a stronger euro, cheaper fuel and a hit from the United States’ tariffs announcement, European Central Bank policymaker Klaas Knot said on Wednesday.
The Dutch central bank governor cautioned, however, that the medium term outlook for inflation was more uncertain as trade snags may push up prices and more fiscal spending in Europe may support employment.
“The strong euro, together with falling energy prices, suggests that the near-term impact might not be so inflationary after all,” Knot told an event at the Peterson Institute for International Economics. “For the medium term, however, there still is the risk that disruptions in global supply chains will put upward pressure on prices.”
He backed keeping the ECB’s policy rate at a level that is “neither accommodative nor restrictive”, which the ECB estimates to be in a range between 1.75% and 2.25%. It is currently at 2.25%.
(Reporting By Francesco CanepaEditing by Gareth Jones)
