One of the candidates to succeed European Central Bank President Christine Lagarde, Klaas Knot, said that a series of economic and geopolitical upheavals means the ECB may need to adopt a monetary policy stance that leans slightly toward tightening.
Knot pointed out that the current phenomenon of financial fragmentation, combined with the eruption of geopolitical risks, will continue to trigger a series of negative supply shocks. "I worry that we may see more of this in the coming years," he said.
Based on this judgment, Knot believes that for the ECB, this means it may need to approach its 2% inflation target more frequently from above rather than from below, and therefore its policy stance is likely to lean toward a relatively hawkish position.
Knot views "approaching the 2% target from above" as a reasonable strategy for dealing with supply shocks, which differs subtly from the traditional central bank communication paradigm of striving to anchor the target precisely.
Despite offering forward guidance on future policy direction, Knot gave clear affirmation to the ECB's current operations. During his tenure as governor of the Dutch central bank, he served on the ECB Governing Council for 14 years before 2025. He said the ECB's current "prudent" policy stance is "the right approach."
Knot further explained the principle of policy implementation: "We must take the necessary measures, but minimize the impact as much as possible." He emphasized that the ECB enjoys extremely high credibility and believes that in circumstances such as the current ones, this credibility will be very helpful.
This statement implies that even if the future policy stance becomes more hawkish, the ECB may still rely on its accumulated policy credibility to advance adjustments gradually and avoid excessive shocks to the market.
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