European Central Bank (ECB) policymaker Klaas Knot said on Tuesday that conditions for a rate hike are very unlikely to be met in 2022, as reported by Reuters.

Additional takeaways

"Inflation to fall below 2% towards the end of 2022 but must prepare for upside scenarios."

"APP is the appropriate tool for marginal policy adjustment beyond PEPP, should keep optionality to adjust APP both up and down."

"ECB should not make long-lasting unconditional commitments once PEPP ends; must maintain optionality."

"Inflationary pressures from higher energy prices, supply bottlenecks last longer than initially thought."

"Higher wage increases will become more likely if inflationary pressures were to persist longer."

Market reaction

The shared currency stays on the back foot following these comments and the EUR/USD pair was last seen losing 0.1% on the day at 1.1572.