The ECB decided to lower the interest rates and to restart net purchases under its asset purchase program (APP). According to Knot these are crisis measures, while it is not a crisis yet in the European economy. The ECB is of the opinion that, with inflation falling, exceptional policy measures are needed, given its concerns about the inflation outlook in the euro area.
"This broad package of measures, in particular restarting the APP, is disproportionate to the present economic conditions, and there are sound reasons to doubt its effectiveness," Knot stated on the website of the DNB on Friday. Xinhua news agency reported. "The euro area economy is running at full capacity and wages are increasing."
"The economic slowdown means it is unavoidable that it will take longer before the ECB reaches its inflation aim of below but close to 2 per cent, but this is not to say that this aim is completely out of reach," Knot added.
"Neither is there a risk of deflation, nor are there any signs pointing to a euro area-wide recession. The only observation is currently that the inflation outlook lags behind the ECB's aim. This is worrying, but it does not imply that restarting a far-reaching measure such as the APP is the appropriate instrument," said Knot.
( With inputs from IANS )