Thijs Knaap on BNR Newradio about higher interest rates

Published on: 13 June 2022

On Thursday, the European Central Bank announced its first rate hike in 11 years. APG's Chief Economist Thijs Knaap spoke about it on Monday in the radio program BNR's Big Five.


The higher interest rate means in any case that the funding ratio of pension funds will rise. "That leaves more room to increase pensions," Thijs says in conversation with presenter Paul van Liempt. The question is whether this will be sufficient, because pensioners have to deal with rising prices. "The moment the funding ratio remains high long enough, the pension will also rise. Do rising prices and rising pensions cancel each other out altogether? If all goes well, yes, although it also depends on which pension fund you are with," says Thijs. He points out that the pension system is aimed at offering a good real pension, i.e. that the purchasing power of the pension is maintained as much as possible. "That system seems to be working, because we are now seeing the coverage ratios rise very quickly."


Compared to other major central banks, ECB President Christine Lagarde comes quite late with the announcement to raise interest rates. Thijs understands that caution. The economy is no longer the same as it was 11 years ago, "and you can't really know what the effect of the rate hike is until you do it. Then it is very wise to first raise the interest rate a little bit to see if it might have major consequences." Unlike the Federal Reserve, which is tasked with curbing inflation and combating possible unemployment, the ECB has only one explicit goal: to monitor price levels. Nevertheless, according to Knaap, they have a kind of shadow goal in Frankfurt, and that is not to cause too much damage to the economy when curbing inflation.

Listen to the entire broadcast here (Dutch). Also read ‘Five questions about the announced interest rate hike by the ECB’.