ECB’s Knot – No Need For Immediate Rate Cut

European Central Bank Governing Council member Klaas Knot said he doesn’t see any immediate need to cut official interest rates or offer more liquidity to counter a jump in money-market rates.

“Why we are still seeing volatility is a bit of a puzzle for me because there needs to be a distortion somewhere in the market,” Knot said in an interview yesterday at the World Economic Forum in Davos, Switzerland. “I don’t have a conclusive answer, I don’t think anybody has. I would argue we would need to understand the drivers better before we could come to a conclusion this would warrant policy action.”

Banks including Barclays Plc, Royal Bank of Canada and Commerzbank AG predict the ECB will cut rates soon amid concern that the rise in market borrowing costs threatens the euro area’s recovery. At the same time, economic data is signaling that the ECB’s current record-low rates, abundant central-bank liquidity and government reforms may be sufficient to foster growth in the 18-nation currency bloc.

BusinessWeek

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