FILE PHOTO: A view of the European Central Bank (ECB) headquarters in Frankfurt, Germany, March 6, 2025. REUTERS/Jana Rodenbusch/File Photo
BRUSSELS: European Central Bank (ECB) governing council member Martin Kocher sees an equal chance of lowering or raising interest rates as the next move, while for the time being it’s reasonable to keep borrowing costs unchanged.
“The next step could be a cut or a hike. I don’t have a bias,” the Austrian central bank chief said in an interview in Washington, stressing that “it would need significant changes to the outlook to change our stance”.
Speaking at the International Monetary Fund’s (IMF) annual meetings, Kocher said there’s a lot of uncertainty and “it’s important that we remain flexible and ready to act if necessary.”
At the same time, however, he said that “given the data so far, our rates are appropriate”.
Most officials have shown little appetite to cut interest rates further after eight quarter-point reductions within a year.
Some argued, though, that more easing shouldn’t be excluded as growth and inflation could turn out to be weaker than expected.
France’s François Villeroy de Galhau told Bloomberg that the ECB is more likely to lower rates than raise them as its next move.
Chief economist Philip Lane has also said that while he doesn’t see any need to act now, the potential choice is between staying on hold or lowering.
Still, others such as Spain’s Jose Luis Escriva and Latvia’s Martins Kazaks said there’s currently no bias towards reducing borrowing costs and that the ECB could equally end up hiking them.
Kocher, head of Austria’s central bank since September, said a “steady-hand policy makes sense” in the current environment.
“If we were to cut interest rates now, only to potentially have to raise them again six or nine months later, that would probably not be the best strategy,” he said.
“We also shouldn’t over-engineer monetary policy.”
Kocher sees risks to the growth outlook as “broadly balanced”.
While dangers from geopolitics point to the downside, “there are also upside chances in terms of the economy”, he said.
“The German fiscal package will help next year, but probably even more in 2027 and 2028,” Kocher said. “And people still have a lot of savings.”
Risks to inflation are also balanced, he argued, adding that “we shouldn’t overreact if inflation goes slightly above or below 2%.”
The latest ECB projections envisage consumer price growth slowing to 1.7% next year before returning to 1.9% in 2027. — Bloomberg
