AMSTERDAM (Reuters) – The persevering with rise of inventory markets worldwide may very well be the results of rising hopes of financial restoration, and doesn’t essentially imply that costs are overly inflated, European Central Financial institution governing council member Klaas Knot mentioned on Sunday.
“We positively see excessive valuations,” the Dutch central financial institution governor mentioned in an interview on Dutch public tv.
“Inventory markets may very well be preempting the roll out of vaccines and the reopening of economies. We is likely to be coming into the roaring twenties, we do not know.
“Additionally rates of interest are low, which is essential for inventory valuations and results in larger inventory costs,” Knot mentioned.
However Knot warned particular person traders towards becoming a member of the latest rallies in corporations similar to GameStop.
“If this turns into a race between people {and professional} traders, it’s clear who will undergo ultimately: the small investor,” he mentioned.
Knot mentioned he was “cautiously optimistic” on the possibilities for financial restoration later within the yr, as COVID-19 vaccinations may allow international locations to finish lockdowns.
“2021 will probably have two faces”, he mentioned. “Vaccinations provide the angle of a means out of this disaster and a significantly better second half of the yr.”
Knot mentioned earlier this week that the ECB nonetheless had room to chop rates of interest if the financial restoration proves too sluggish to maintain its inflation goal in sight.
One other ECB policymaker, Isabel Schnabel, mentioned on Sunday that one-off elements had been more likely to trigger spikes in inflation later this yr and that elevating rates of interest within the present setting would have a “devastating influence”.
(Reporting by Bart Meijer; Modifying by Catherine Evans)
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