European Central Bank Governing Council member Klaas Knot said it’s “not unlikely” that investors will have to adjust their expectations for borrowing costs to be lowered in 2024.
“Financial markets are already pricing in interest-rate cuts for next year,” Knot said Thursday in a speech in Brussels. “If they have to adjust this expectation, which is not unlikely, this could lead to new corrections.”
In the fastest tightening campaign in its history, the ECB has raised its deposit rate to 3.25%. Once rates reach their peak, they should stay there for a “significant” period of time, Knot said last week.
The Dutch central bank chief also said government borrowing, which grew rapidly during the pandemic, could cause problems “with rising interest expenses.”
“This is particularly true for large debts that need to be rolled over and reinvested in the short term,” he said.
