ECB’s Knot Vows More Rate Hikes Amid ‘Too High’ Core Inflation

April Roach and Cagan Koc, Bloomberg News

The European Central Bank (ECB) skyscraper headquarters building stands above commercial and residential property at dawn in Frankfurt, Germany, on Wednesday, July 25, 2018. The ECB president and his colleagues will set policy on Thursday, with analysts predicting the Governing Council will reaffirm that bond purchases will end in December and interest rates could start rising after the summer of 2019. , Bloomberg

(Bloomberg) -- The European Central Bank needs to continue raising interest rates amid a “too high” underlying inflation rate, said Governing Council member Klaas Knot.

The ECB will have to raise borrowing costs “as long as the underlying inflation hasn’t been tamped down,” Knot said in an interview on the Buitenhof TV show on Sunday. “Our real problem at the moment is that core inflation is still too high.”

The central bank on Thursday raised the deposit rate by a quarter-point to 3.25%, following three moves of double that size. ECB President Christine Lagarde also signaled that there will likely be more interest-rate hikes to come. “We have more ground to cover, and we are not pausing,” she said.

Euro-area consumer prices, stripped of volatile items like fuel and food, rose 5.6% from a year ago in April — down just a shade from March’s record 5.7%. The Dutch central banker, who is among the region’s more hawkish officials, said the ECB may reach its 2% inflation goal “sometime in 2025.”

“But our policy works with some delays so the biggest impacts of what we’ve done so far are still in the pipeline,” Knot said. “That is why we have deemed it somewhat responsible, and that was also my commitment in the meeting, to take a step back from half a percentage point to a quarter percentage point per meeting.”