Klaas Knot, a candidate to succeed Christine Lagarde as president of the European Central Bank, says core inflation and second-round effects will probably pick up. Second-round effects are what happens when dearer energy feeds into wages and other prices. The ECB would then respond with "somewhat hawkish" policy, he says.

That is a forecast, not yet a trend. Eurostat's flash estimate puts euro area inflation at 4.0% in October, up from 3.8% in September, with energy up 20.8% and services up 3.3%. But core inflation, which leaves out energy, food, alcohol and tobacco, was unchanged at 2.5%, according to Memesita's coverage of the flash estimate. Knot is saying price pressure will broaden beyond energy.

Policy is already leaning that way. The ECB raised rates in June and September, taking the policy rate from 2.0% to 2.50%, and the Council left it there on October 29. Officials are ready to raise in December, and JP Morgan expects an increase then and another in March 2027. Knot's view therefore looks like continuity with the Council, not a break, and it keeps up the pressure on long-dated European yields.

NL Times, citing NOS, reports that the Netherlands has nominated Knot and that the Dutch finance ministry sees him as the best successor to Lagarde. Lagarde has said she will leave in February, and eurozone leaders are expected to settle on a successor within the next few weeks. German Chancellor Friedrich Merz has said the search will be completed by the end of the year.

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