A member of the European Central Bank says the market is mispricing interest rate hikes and expects more

Klaas Noth, president of De Nederlandsche Bank, spoke to CNBC in Davos.

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DAVOS, Switzerland — The European Central Bank will not stop at a single 50 basis point hike at its next rate-setting meetings, a board member told CNBC on Thursday.

“It won’t stop after a one-time 50 basis point increase, that’s for sure,” said Claas Knott, who is the governor of the Dutch central bank, about the ECB’s upcoming moves.

The European Central Bank raised rates four times in 2022, bringing the deposit rate to 2%. In December, the central bank said it would raise rates further in 2023 to tackle extremely high inflation.

The latest data points to a slowdown in headline inflation, even if it remains well above the ECB’s 2% target.

Inflation in December in the Eurozone reached 9.2% according to preliminary data. This was the second consecutive monthly decline in price increases in the eurozone. Knott, however, doesn’t think all the recent data is “encouraging.”

“What we have seen so far is data that is not encouraging from our side,” he told the World Economic Forum in Davos.

“We saw yet another inflation reading that showed no sign of easing [the] underlying inflationary pressure. So we’ve got to do what we’re going to have to do, and core inflation hasn’t moved into the Eurozone yet, and that means the market developments that I’ve seen over, say, the last two weeks or so, are not entirely welcomed by my point of view. I don’t think they’re actually consistent with getting inflation back to 2% in time,” Knott said.

Market players expect the ECB to raise interest rates at its next meeting in February. The broader question is whether the central bank is getting too aggressive with its policy tightening and curbing economic growth. Noe, however, made it clear that there would be at least two more rate hikes.

“Most of the ground we need to cover is going to be covered by a steady pace of multiple 50 basis point hikes,” he said.

“Where this kind of pace of 50 basis point hikes will end up, I can’t say in advance, but it’s very clear that our president has been plural in his wording, I’m using the plural here.” So it’s not going to stop after a one-time 50bps increase, that’s for sure.”