ECB needs greater flexibility in inflation targeting: Knot

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[September 14, 2016]  VIENNA (Reuters) - The European Central Bank needs to exercise greater flexibility in interpreting its inflation mandate as the shock it is trying to overcome is bigger than any other in the previous 80 years, Governing Council member Klaas Knot said on Wednesday.

European Central Bank (ECB) governing council member Klaas Knot attends a forum organised by Mexico's Central Bank in Mexico City October 15, 2013. REUTERS/Tomas Bravo

Knot added that a key challenge for the ECB is the disconnect between its communication and market expectations, a potential danger if the bank becomes a captive of market expectations.

"There is a pretty clear case to be made that the medium term should be interpreted flexibly," said Knot, who is also the Dutch central bank chief.

"You see a lot of speculation about what's next. I think it's very dangerous for a central bank to become too much captive of financial market expectations," he told a conference in Vienna.

(Reporting by Francesco Canepa; Writing by Balazs Koranyi Editing by Jeremy Gaunt)

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