By David Barwick – FRANKFURT (Econostream) – We wouldn’t claim that European Central Bank Governing Council member Martin Kocher sounded on balance like a dove in our just-published interview with him, but to the extent he reflects the current thinking of Council hawks, the case for a June hike may still hang in the balance.

Kocher, who heads the Austrian National Bank, is seen as one of the Council members more given to worrying about inflation, albeit not obsessively. Initial impressions of his interview on Monday with Swiss daily Neue Zürcher Zeitung appeared to confirm that: the inflation threat had risen because of the Middle East conflict, second-round effects could become more likely if the conflict and high energy prices persisted, and a rate move would be unavoidable in the near future unless the situation improved significantly.

Following our own in-depth interview, Kocher’s position looks more conditional, more cautious and less clearly aligned with a June move at this admittedly still early date.

That he essentially ruled out a rate cut in talking to us can be discounted, as this issue is not currently live. Nor is it revealing that he said the Governing Council would discuss whether to hold or hike at its June meeting. That was already April’s discussion, as ECB President Christine Lagarde reported, and unless something major changes, there will be no avoiding such a discussion on June 11.

The more interesting question is to what extent Kocher used that state of play to push markets toward a June hike. That is a role he generally declined to play.

Asked directly whether the baseline was now to move in June, Kocher said no. He framed the decision as a meeting-by-meeting judgment, with the ECB seeking to avoid both an unnecessary hike and the postponement of a necessary one. That is balanced, and precisely that balance suggests a lack of eagerness to make June the default.

By a similar token, Kocher’s stagflation concern—which also came through in our interview—cuts both ways. It keeps the inflation problem alive, but it also keeps the cost of tightening in view.

Kocher was explicit about this trade-off. Monetary policy cannot do much about the supply side of an energy shock, he said. It mainly works through demand. Given that demand is weaker than in 2022, even if not weak outright, that makes the response less precise and potentially more costly.

That is no argument against ever hiking, but it is an argument against treating the energy shock itself as a sufficient reason to hike mechanically in June.

The same applies to Kocher’s comments on the baseline. He noted that the March baseline contained two rate hikes before year-end and that, if things did not improve on the price front, keeping rates unchanged until year-end would be difficult to square with the projections.

At first glance, that sounds hawkish. But the horizon is telling. The issue he raised was not whether rates could remain unchanged through June’s meeting, a mere four weeks off, but whether they could remain unchanged through year-end. In early May, that is a much softer formulation than an implicit call for immediate action.

His description of the economy relative to the ECB’s scenarios was similarly measured. Kocher said the Eurozone remained closest to the baseline, albeit somewhat worse than it. It was not yet close to the adverse scenario, though the longer the shock persisted, the closer it would move in that direction.

Again, this is not comforting, but neither is it alarmist. Saying that the economy is not better than the baseline is a low bar in the current environment. The more important message is that Kocher still saw the baseline as the closest reference point.

Even on wages, where his comments came closest to supporting a June move, Kocher stopped short of pushing for one. He said it would be difficult to wait for certainty about wage effects, because much of the evidence might come only in autumn or later. That is a genuine warning against excessive delay.

And yet, it is not the same as saying that the evidence already justifies action on June 11. It means the ECB may have to act before all wage data are in if inflation expectations and price developments demand it. The conditionality remains central.

Kocher also rejected the notion of an “insurance hike.” That is one of the least hawkish elements of the interview. If he were looking for a low-cost way to justify June, precaution would be the obvious route: hike once, signal vigilance, and reassess later. Instead, he said the data should provide enough arguments for a hike or not.

This refusal to endorse precautionary small moves also limits the hawkish implications of his “one-and-watch” answer. Asked whether a June hike would imply a bias toward one-and-done, he said no. Of course, that was the only answer consistent with the ECB’s abandonment of forward guidance. A promise of one-and-done would have gone well beyond the meeting-by-meeting approach.

The same applies to his view of 50bp. Kocher described such a move in June as “very unlikely.” Pressed on what could make 50bp worth considering, he offered a scenario of renewed full-blown war and no prospect of reopening the Strait of Hormuz, but quickly noted that the same scenario would also weaken demand, making the policy response less straightforward. He said he did not see realistic scenarios at the moment that would lead in that direction.

Where does that leave June?

Kocher plainly wants the hike option preserved. He does not want the ECB to wait until every wage round has confirmed the problem. He does not want markets or the public to doubt the ECB’s willingness to fight medium-term inflation above 2%. And he does not want a hold in April to be interpreted as tolerance of inflation risk.

But wanting the option preserved is not the same as wanting to exercise it. The line Kocher held in talking to us was finer: June is not pre-decided, a hold remains possible, a hike must be justified by the data, and the ECB must be able to explain either decision.

For a hawk, that is not especially hawkish.

That does not make a June hike unlikely (and to be clear, we still expect one). It means that the hawkish case still needs more than the mere persistence of elevated energy prices. It needs evidence that the shock is becoming sufficiently durable, broad or expectation-relevant to warrant tightening despite the weakening-growth channel.

Kocher therefore makes June look less like a meeting with a hidden default outcome and more like one at which the Governing Council will still be weighing moving unnecessarily against waiting too long. The direction of travel may be clear, as Lagarde indicated, but the date is not.