European Central Bank council member Klaas Knot said the bank is facing “challenges” from the recent inflation outlook.
The EURUSD exchange rate has made another attempt to get through 1.1400 and is at risk of a correction. The 2024 resistance at 1.2012 is back in play to act as support, with a failure likely heading to 1.0800.
Knot, head of the Dutch central bank De Nederlandsche Bank (DNB), stated on Wednesday that the current outlook for European inflation is unclear, making it difficult for the ECB to take direct action.
His comments noted that the medium-term inflation outlook is not clear, while near-term growth and inflation risks are to the downside. The Dutch banker believes that monetary policy should remain neutral for the moment. He also said that “inflation dynamics may pose considerable challenges.”
Europe is currently absorbing the U.S. administration’s tariffs, and that is likely to add further pressure to the already weak economy. The latest monthly Consumer Expectations Survey by the European Central Bank said that Eurozone inflation is expected to trend higher in April for the year ahead.
“Inflation expectations for the next 12 months increased further, by 0.2 percentage points to 3.1% versus 2.9% previous”, the report said, adding that “inflation expectations for 3 years ahead unchanged at 2.5%”.