ECB’s Kocher: Further Euro Gains Could Trigger Rate Cut if They Lower Inflation Outlook

28 January 2026

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Martin Kocher on Wednesday said the ECB may need to consider another interest rate cut if further euro appreciation starts to weigh on its inflation projections.

Kocher, who heads the Austrian National Bank, called the single currency’s recent rise against the dollar “modest” and said it did not require a response at present.

Further strengthening could change that calculus, he told the Financial Times in an interview: “If the euro appreciates further and further, at some stage this might create of course a certain necessity to react in terms of monetary policy.”

He stressed that any response would be driven by the inflation implications rather than by the exchange rate itself. “[N]ot because of the exchange rate itself, but because the exchange rate translates into less inflation, and then this is of course a monetary policy issue,” Kocher said.

Pressed on whether there is a level that would become problematic, Kocher rejected the idea of an exchange rate objective. “It would not be serious to have a target on the exchange rate — the target is on the inflation rate,” he said, declining to specify any threshold.

Trade uncertainty also featured prominently, with Kocher warning that tariff risks “remain on the table and I’m afraid they will remain on the table for the foreseeable future,” complicating firm guidance on the policy outlook.

On the economy, he said the euro-area recovery has been more resilient than expected and that he was “cautiously optimistic” about growth this year, while listing the main downside risks as further trade tensions, geopolitical developments, and the possibility of an equity-market reversal.

For now, he said, there is no need to change rates, while arguing that policymakers should keep flexibility given the uncertainty. “It makes absolute sense at the moment to keep full optionality of monetary policy decisions: the situation is uncertain,” Kocher said.