By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Martin Kocher on Monday said the ECB should be ready to move interest rates quickly in either direction if current uncertainties affecting the euro area outlook were to materialize, while making clear that policymakers should not react prematurely to risks that had not yet shown up in the data.

Kocher, who heads the Austrian National Bank, told The Wall Street Journal in an interview that the ECB was close to the end of its easing cycle but faced an environment in which the next move could still be either a cut or an increase.

“When you are at the end, or very close to the end, of this easing cycle that we have been following, then it’s always difficult to say what happens next,” Kocher said. “In times where we really have high levels of uncertainty, it’s important to be in a situation where you can act quickly.”

At the same time, he argued against trying to get ahead of hypothetical shocks, saying the ECB should respond to realized effects on inflation and growth rather than to possible scenarios alone.

“There is a high option value of being able to act if and only if some of the risks of the uncertainties manifest themselves,” he said. “Pre-empting uncertain outcomes with monetary policy decisions is complicated and perhaps dangerous.”

On the euro, Kocher said exchange-rate moves would be taken into account in assessing the inflation outlook, but stressed that they would not mechanically drive policy decisions.

“At some stage, if that continues, then this might have effects on our inflation outlook,” he said. “The exchange rate is not a trigger parameter for the ECB.”

Kocher also signaled no expectation of an imminent policy shift, saying markets correctly understood that the ECB was in a position to move if necessary without needing to signal now whether rates were more likely to go up or down over the coming year.

“They think there’s not much going to happen in terms of the ECB’s monetary policy over the next couple of months,” he said. “They know that we are able to act, that we will be acting quickly if necessary.”

With inflation near the ECB’s target, Kocher said the central bank was currently in a favorable position.

“We are in a position where inflation is exactly where you want it to be,” he said.