Klaas Knot: Staying the course

Keynote speech (digitally) by Mr Klaas Knot, President of the Netherlands Bank, at MNI Market News, London, 8 February 2023.

Central bank speech  | 
09 February 2023
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Today, I will attempt to walk you through the evolution of our inflation problem and the implications this carries for ECB policy in the next few months.  

Inflation in the past two years 

As you all know by now, the decade of below-target inflation swiftly came to an end in the course of 2021. Our economies rebounded from the pandemic with households disbursing their growing deposit balances, but also with supply still severely constrained after a long period of pandemic contagion measures. Headline inflation approached an unprecedented 5% already in 2021.  

The unconscionable war in Ukraine, and the associated pressures in energy and food supply then pushed headline inflation into unprecedented double-digit territory in October and November last year, and to 8.4% for 2022 overall.  

The ECB has – with its tightening policy measures - mostly been leaning against the re-opening demand factors that first brought up inflation, while also guarding against a broadening of inflation after the second upward push by the energy supply shocks. As the latest figures show, headline inflation indeed appears to have peaked, and is gradually coming down, largely thanks to rapidly falling energy prices.