ECB’s Kocher: High U.S. Tech Valuations a Risk, but No Need for ECB to React to Small Forecast Misses

2 December 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Martin Kocher on Tuesday said that high equity valuations tied to artificial intelligence in the United States warranted caution, even as he stressed that euro-area banks were stable and that risks to Europe stemmed mainly from abroad.

In an interview with Austrian daily Kurier, Kocher, who heads the Austrian National Bank, said that although the trade-policy environment in 2025 had turned out “not quite as bad as some expected,” it was “too early to give the all-clear.”

He warned of “very high valuations, especially in the U.S. for stocks linked to AI,” adding that ensuring financial stability was “very important.”

“A problem can of course spill over from the United States, as we have seen several times,” he said. “A certain degree of caution regarding the valuations of some U.S. stocks is therefore justified.”

Turning to the ECB’s monetary-policy outlook, Kocher said that inflation of 1.7% in 2026 — the figure in the ECB’s latest projection — should not by itself prompt a rate reaction.

“I am of the view that slight deviations above or below the 2% target should not trigger action, because we cannot and do not want to pursue this kind of monetary policy micromanagement,” he said. The ECB should “keep enough powder dry to react quickly if necessary,” he added.

Kocher expressed optimism about the domestic economic outlook for 2026.

“Above all, the inflation rate will substantially fall back toward 2%,” he said, citing the one-off effect of the expiry of Austria’s electricity price brake at the end of 2025 and what he called “the economically prudent wage agreements” recently negotiated.

“This year is still weak, next year will be stronger, and with that, a certain upswing can take shape,” he said.