Klaas Knot, the Dutch Central Bank President and a member of the European Central Bank's governing council, said on Sunday, per Reuters that he expects the ECB to raise interest rates in the fourth quarter of this year.
The ECB policymaker appeared on Dutch television program Buitenhof ECB’s Knot said that he supported winding down the Eurozone central bank's asset purchasing program as quickly as possible.
Additional quotes
Personally I expect our first rate increase to take place around the fourth quarter of this year…. Normally we would raise rates by a quarter percentage point, I have no reason to expect we would take a different step.
A second rate hike would follow the first one in short order, likely in the first quarter of 2023.
The bank must first end its asset purchasing programs, currently set to be wound down in steps to 20 billion euros per month by the fourth quarter. However, since Thursday bond markets have begun pricing in around 40 basis points of rate hikes by December.
FX reaction
Given the early hours of Asia, market players are yet to react to the news. However, the recent challenges to the risk appetite could join the chatters of hawkish monetary policies to exert downside pressure on the Antipodeans.
