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ECB central banker warns of high inflation risks «


Governing Council member Klaas Knot fears sudden corrections. These should be avoided.

2:29 pm, October 11, 2021


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“Current risk appetite in stock markets can only be sustained by low inflation and low interest rates” © hanohiki –

ECB board member Klaas Knot warns investors in financial markets about the dangers of high inflation. It is important to be aware of these risks in order to avoid sudden corrections, the Dutch governor said on Monday.

“Current risk appetite in stock markets can only be sustained by low inflation and low interest rates”, explains Knot. He still expects the current rise in inflation to be largely temporary. But other scenarios would have to be considered as well. Otherwise it could be in the future a shock-like price reduction to lead.

Inflation in the euro area was 3.4 percent in September, the highest in 13 years. In the opinion of the European Central Bank (ECB), however, much of the current price increase is only temporary and caused by the consequences of the crown crisis. These include supply chain problems and material bottlenecks. Slightly weaker inflation is therefore expected again next year.

“Realignment of International Trade”

However, according to Knot, it may also be that global supply bottlenecks are to some extent not just a temporary phenomenon. “They could be caused by a readjustment of international trade, as supply chains stretch less around the world,” the central banker said. Recently, in addition to rising energy prices, congestion in semiconductors, wood, copper and building materials has caused rising prices in the euro area.

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