By David Barwick – FRANKFURT (Econostream) – The European Central Bank’s June rate hike was necessary even if a milder inflation scenario now materializes, but the Governing Council is not pre-committed to any future path, ECB Governing Council member Martin Kocher said Wednesday.

Kocher, who heads the Oesterreichische Nationalbank, told CNBC on the margins of the ECB Forum on Central Banking in Sintra, Portugal that the stabilization of the situation in the Middle East and latest inflation readings were positive signs, but that uncertainty remained high.

“I think it would be premature to draw too quick conclusions,” he said. “It’s important to remain vigilant and alert.”

The latest inflation readings suggested that inflationary pressure “could be less strong than it was a month ago,” Kocher said. “But we’ll see. It’s a bit early to call.”

The ECB had raised rates at its June meeting, and “I think it was a good decision,” he said. “It was a necessary decision.”

The hike was based on a robust analysis of different scenarios, Kocher said. “So even for a milder scenario that might now turn out to be true, that might now manifest itself, the hike was correct in terms of the models, the implications of the models.”

There would be “a constant discussion” in coming months over “whether to hold or to hike,” he said.

“We are not pre-committed to any path,” he said, adding that the Governing Council could wait until its meetings to see how the situation developed.

Everything depended “very strongly” on events in the Middle East, the stability of the situation there and whether it followed the path policymakers hoped for, Kocher said.

The ECB’s mild scenario assumed oil prices around USD 80, he said. Under that scenario, inflation would fall to around 2% already in 2027, but the scenario also implied one or two hikes, depending on the exact path of inflation figures, he said.

“So one hike we have decided upon,” he said. “We’ll see what’s going to happen in the next couple of months.”

Asked about Europe’s productivity challenge, Kocher said the capital markets union, or savings and investments union, was key.

More and deeper capital markets, and less fragmentation, were “very important” because they were key to more investment in Europe and to helping companies grow, he said. They were also needed for public infrastructure projects requiring co-financing from private sources, he said.

Kocher also called for greater confidence in Europe’s economic prospects.

“Europe is not doing that badly,” he said. “It has its problems, but every large economic region has problems.”

The Eurozone had seen “quite some economic momentum” at the beginning of the year before this was interrupted by the war in the Middle East, he said.

“But the economic fundamentals are not that bad,” he said. If reforms were pursued quickly by the European Commission and the European Union, he said, productivity-related growth forces could emerge.

A peace agreement in Ukraine would also help the European economy, Kocher said, provided it was in line with the ideas of Ukraine and the European Union.

Such an agreement would create growth potential from the rebuilding of Ukraine and from greater certainty about the economic development of the European Union, its neighborhood and accession countries, he said.

Asked about the rise of populism in Europe and governments’ ability to enact policies, Kocher said the ECB was independent and that political developments in individual member countries were not within its realm.

Still, it was important that reforms be pursued and that European countries work together, he said.

“There should not be any split-ups and any delays,” he said. “At the moment this is working fine, but we need the speed that helps us get on this higher growth trajectory.”