Jan 17 Reuters Investor bets for European Central Bank rate cuts are excessive and possibly self defeating because they could actually hold back monetary easing, Dutch central bank chief Klaas Knot told CNBC on Wednesday.

Markets are betting on 140 basis points of rate cuts from the ECB this year a drop from 150 basis points priced on Tuesday with the first move in March or April, a timeline several other policymakers have also called out.

Markets are getting ahead of themselves, Knot told CNBC. We are optimistic that we have a credible prospect of a return of inflation to 2 in 2025 but a lot still needs to go well for that to happen.

Knot also warned that the more the market eases financing conditions, thus undoing the central bank39;s work, the more likely it could delay actual rate cuts.

The more easing the markets has already done for us, the less likely we will cut rates, the less likely we39;ll add to it, Knot said. There are expectations of our policy rate movements in current markets we will not vindicate.

He warned that the labour market was incredibly tight and geopolitical risk also adds to inflation risks.

If we are going to remove some of the restrictions that we currently have in place, it will be a very gradual pullback, but not a head over heels pullback, and we definitely will need more wage data on wages, Knot said.

Speaking to Bloomberg TV, ECB President Christine Lagarde said the ECB would be in a position by late spring to review data…