ECB’s Kocher: Ready to React to Changes “In Any Direction, Going up or Going Down”

22 January 2026

By David Barwick – VIENNA (Econostream) – European Central Bank Governing Council member Martin Kocher on Thursday said that current interest rates were appropriate but that the ECB had to be ready to react to developments that could argue for an adjustment in either direction.

In a keynote speech with subsequent Q&A at the University of Applied Sciences for Management & Communication in Vienna, Kocher, who heads the Austrian National Bank, said that the present level of official borrowing costs in the euro area “seems to be in line very well with the 2% inflation rate.”

The ECB’s stance-signaling deposit facility rate of currently 2% is acting in a manner consistent with the natural rate of interest and thus “keeps the inflation rate stable at around 2%,” he said.

As for the outlook, he said in the context of the projections, “Given the status quo, we expect a pretty stable development. Of course there might be lots of things that change.”

“We’ll see to what extent we might have necessities to actually change the interest rates,” he continued. “What do we expect for the next couple of months, until the end of the year? Difficult to say, as I said. If the inflation stays in the euro area … in the area where we are, then there’s not much need to adjust, but we are ready—that’s of course the important thing—we are ready, with full optionality, to react to any changes in the external environment, in any direction, either going up or going down.”

“At the moment, the international environment is so uncertain that we think it’s optimal to have this full optionality and to decide at the meeting whether we stick with our monetary stance, we stick with our interest rates, or whether we want to change them, adjust them upwards or downwards,” he said.

“It’s really difficult to see what’s going to happen, because there’s lots of risks involved in these projections,” he added, highlighting geopolitical and geoeconomic risks in addition to those associated with financial markets.

A comparison of the euro and the US dollar on the basis of purchasing power parity suggested that “the euro is overvalued and the dollar is undervalued,” he said.

“To a certain extent it’s something that the US government wants to see, because they think it makes them more competitive,” he said. “On the other hand, of course, it increases the danger of high inflation rates in the US,” he said.

As to predictions concerning the further evolution of the exchange rate, it was “always difficult” to make these, he said. Exchange rates were “not fully predictable,” dependent as they were on financial market developments, economic growth and political decisions, he said.

Still, he said with reference to the potential for further US dollar depreciation, “since we are above already purchasing power parity, my expectation is at the moment that we don’t see a strong development in the same direction also in 2026.”