Exclusive: ECB’s Kocher: “Given Recent Data, a Somewhat Stronger Growth Outlook Is Not Impossible”

12 November 2025

By David Barwick – VIENNA (Econostream) – Economic growth in the euro area could prove somewhat better than current projections, given the improvement seen in the latest data, according to European Central Bank Governing Council member Martin Kocher.

Kocher, governor of the Austrian National Bank, told Econostream in an interview on Friday (transcript here) that interest rates could theoretically go in any direction. At the same time, he said, they did not have to move at all for however long ECB expectations of growth and inflation remained in line with current prospects, even if that turned out to be an extended period.

Echoing the ECB mantra of monetary policy as being “in a good place,” Kocher nonetheless cautioned that risks remained high in historical comparison, despite having lately become “more balanced.”

As a result, he said, it was “hard to say what will happen until December, but I'm very hopeful that the slightly better outlook will continue and we can stay in a good place.”

Downside risks, some of which would severely dampen growth, would hopefully not materialize, he said. “But given recent data, a somewhat stronger growth outlook is not impossible,” he said.

In any event, the ECB would make a decision based on developments “whether they imply cutting or hiking,” he said. Markets might find it discomfiting, but at this phase of the cycle, “it's logical that moves can go in either direction,” he said.

Were data to remain stable, this would put a premium on the quality of an argument for any policy move and thus mean no change, he said. The ECB could therefore be in for a “long hold” during which it made sense “to keep some power dry” for any eventuality, he said.

Indeed, it would be “not too surprising” if 2026 passed without a rate hike, he said. “I mean, if the inflation outlook remains similar to what we foresee and if GDP projections remain similar, then there might be a longer period of time at the current rate,” he said.

Kocher was relaxed about the euro’s exchange rate, pointing out that it had stabilized lately and, in any case, did not per se drive the ECB’s monetary policy decisions.

“I don't really expect [the appreciation] to continue,” he said. “But we have to wait and see, and it is among the many risks.” For now, the ECB was “far from” the point at which the growth-dampening impact of a strong euro could determine monetary policy deliberations, he said.

Although the “ultimate litmus test” for monetary policy was the inflation outlook, deviations from target in either direction of 0.1 or 0.2 point were “normal” and no reason for concern, he said. “You cannot, of course, expect to always hit the target exactly,” he reasoned.

Inflation expectations, he said in this context, were “the most important aspect, more important sometimes than even the outlook and modest deviations from our target.” This was especially true with respect to any projections for the relatively distant 2028, he said.

The Emissions Trading System 2 (ETS 2) would likely be a one-off in terms of the inflation impact, he said, dismissing the idea that it could motivate a shift in the ECB’s policy stance.

“I personally think that this issue is getting a bit too much attention,” he said. “We're talking about a very modest effect on inflation.” Even if there is an ETS 2-related impact on inflation prospects, he said, “any resulting deviation from our target should be mild.”

The influx of Chinese goods into Europe was mainly a threat from the perspective of competitiveness, according to Kocher, given the potential for this to result in dependencies. In terms of inflation, the direction of the impact – if there were still one following the new US-China trade agreement – was unclear, he said.

Increased German government spending was important for European growth prospects, given that the positive impact would cushion the more negative effect of fiscal consolidation in other countries, he said.

He voiced confidence in the eventual materialization of this fiscal impulse. “It's a clear political commitment by the German government to provide the stimulus,” he said. “Some of it will be seen in the data in 2026, but it will probably take until 2027 to fully take effect.”

Some exuberance was visible in parts of financial markets and needed careful monitoring, Kocher cautioned. There was an increased probability of price corrections, with the key question being “whether these corrections will be moderate and occur over a longer period, or be more profound and sudden,” he said.

Euro area labor markets were not necessarily headed for a downturn, he said. “All our projections confirm this resilience, and there’s a solid structural argument for it,” he reasoned, citing demographic trends and reduced immigration.

“That helps prevent a higher unemployment rate, even if growth is slower than 20 years ago and slower than what was considered necessary to stabilize the unemployment rate at that time,” he said.

Regarding the incipient process of reconstituting the ECB’s Executive Board, Kocher expressed understanding for arguments based on national origin, provided these were never given primacy over actual qualifications.

“There might be some considerations regarding geographic composition of the Executive Board, but in my opinion, these should never be the main argument,” he said.