Klaas Knot, one of two candidates to lead the European Central Bank, said the bank should be ready to use existing crisis tools and could consider a new instrument if a future crisis differs from earlier ones. He made the comments in an interview with the Financial Times.
Knot’s remarks describe a possible response to a future crisis, not a specific tool or an ECB decision. He said the central bank should counter unwarranted, disorderly moves in sovereign-bond markets. He also said no single spread level should automatically prompt intervention, and that higher government borrowing costs alone would not justify bond purchases.
The ECB already has crisis instruments. Its Transmission Protection Instrument, approved in 2022, allows secondary-market purchases of securities in eligible jurisdictions when disorderly market dynamics seriously threaten monetary policy transmission. The ECB’s Outright Monetary Transactions framework, established in 2012, requires strict conditions tied to a European Financial Stability Facility or European Stability Mechanism program.
The comments come as the ECB faces a separate near-term question over interest rates. The bank held rates unchanged on Oct. 29, leaving the deposit facility rate at 2.50%, while warning that rising energy prices posed upside risks to inflation and downside risks to growth.
Knot was nominated by the Netherlands alongside Spain’s Pablo Hernández de Cos. The Eurogroup reviewed the candidacies on Nov. 9; the European Council will make the final appointment after a Council recommendation and consultations with the ECB and European Parliament.
