ECB’s Kocher: “Good Argument to Be Made for Not Adjusting the Policy Rate”

16 October 2025

By David Barwick – WASHINGTON (Econostream) – European Central Bank Governing Council member Martin Kocher on Wednesday said that he saw no grounds at the moment for changing euro area interest rates.

At a conference of the Reinventing Bretton Woods Committee, Kocher, who heads the Austrian National Bank (OeNB), said that despite the “huge uncertainties,” his view was that “there is a good argument to be made for not adjusting the policy rate … as long as we are close to 2%, as long as there are no shocks from outside.”

Of course, this situation “may change quickly,” he acknowledged. Still, it made sense, “as long as we are where we are, to remain prudent and vigilant, but there’s no need to be overactive.”

Rather, it was preferable for the ECB to keep some “dry powder” so as to be able if necessary “to quickly adjust policy according to what is coming.”

“Given the times that we are in, I think it’s a diligent approach to monetary policy,” he said.

Kocher emphasized that “policy uncertainty is particularly high at the moment” and that “these global turbulences make it difficult to interpret the data … in terms of their impact on inflation rates and growth rates.”

In this context, he cited frontloading, rerouting of trade, structural changes in global commerce, tariffs and the announcement of tariff intentions.

“For the Eurozone of course, being a very export-oriented … economic area, all these developments have an effect,” he said. With respect to growth, “the outlook is not spectacular.”

Inflation prospects seemed more stable, he said, which is why ECB President Christine Lagarde seized upon the expression that “we are in a good place.”

Kocher spoke out against automatically reacting to any miss of the ECB’s 2% price stability target.

“I warn against trying to over-engineer, over-fine-tune what monetary policy can do,” he said. “Overreaction is not advisable” in the case that inflation projections under- or overshoot the target.

There would be new forecasts coming in December, including a first prediction for 2028, he reminded. “We’ll see to what extent this undershooting … might be more permanent than we thought,” he said.

Asked what he worried about most policy-wise, Kocher replied, “Of course there’s lots of things that concern policymakers at the moment and it’s difficult to pick one out.”

Trade risks had become “more balanced,” and “the impact of the trade developments at least so far are smaller … than we expected,” he said. Many aspects of the policy environment were subject to change, “but it’s difficult to pin it down,” he said.

That being the case, “it’s important to be able to act quickly,” he said. “There is no pre-commitment.”