(Bloomberg) -- Prospects for the euro-zone economy to recover next year and uncertainty over the strength of wage growth mean there’s no reason for the European Central Bank to rush into cutting interest rates, according to Governing Council member Klaas Knot.

While the latest slowdown in inflation was a “very welcome confirmation” that the ECB’s monetary-tightening campaign is effective, it’s still too soon to declare victory, Knot told German newspaper Boersen-Zeitung in an interview. 

Based on currently available information, a rate cut in the first half of next year is “rather unlikely,” he said.

The ECB kept borrowing costs unchanged for a second time last week after a run of 10 hikes. Even before the meeting, economists and investors were speculating on the timing of the first rate cut, with some betting on a move as early as March.

Knot argued that wages will be renegotiated for 40% to 50% of all European employees at the start of 2024, and the results won’t be fully available until mid-year. 

“Why should we, as evidence-based decision-makers, front-run such important information?” he asked. “We have to wait and see how wages develop before we can say that inflation has also turned the corner durably.”

Real wage gains will boost purchasing power and — together with a strong labor market — form a “credible basis for an upturn in 2024,” Knot said. At the same time, monetary tightening is hurting the economy less than in previous cycles. 

“I would be in no hurry to cut interest rates,” he said, adding that “although quite unlikely, I wouldn’t categorically rule out further interest-rate hikes just yet.”

Knot warned that while risks to the inflation outlook are right now “roughly balanced,” continued market pricing for rate cuts early next year would be an upside risk. “Markets always tend to be optimistic at the end of the year, often followed by a hangover in January,” he said.

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