ECB's Knot: Technically speaking, we haven't hit effective lower bound on rates
Comments by ECB governing council member, Klaas Knot, in Davos
- But there are decreasing returns to further rate cuts
- Strategy review an opportunity to close perception gap on inflation
- ECB has underestimated communication with citizens previously
The headline remark isn't what you'd expect from a hawk like him but it needs to be paired with the fact that he does mention that there downside risks to cutting further - a view that he has advocated for the longest of time now.
The euro is struggling to keep afloat despite the better data from Germany earlier, and that is a bit worrisome in my view. If the 1.1040 level firmly gives way, we could see a run towards 1.0990-00 next as sellers continue to keep near-term control.