By David Barwick – SOFIA (Econostream) – European Central Bank Governing Council member Martin Kocher on Tuesday said that euro area monetary authorities needed to ensure that current price pressures did not become entrenched.

“It is a difficult situation” given the supply-side nature of the shock and the difficulty of finding a properly balanced approach, Kocher, who heads the Austrian National Bank, said during a panel discussion at the OMFIF Sofia Forum in the Bulgarian capital. 

“But the inflation risks are there and it all depends on geopolitical developments that are difficult to predict,” he said. “That’s the reason for our cautious approach,” he said.

Forward guidance was impossible under such uncertainty about what would happen just within the next couple of months, he said.

“But indeed we have to make sure that this inflation this time does not become entrenched, does not propagate into second-round effects,” he said. The ECB was “well prepared to do so.”

Kocher expressed the hope that there would be some improvement before long in terms of the situation in the Middle East.

“The underlying economic development in the euro area is actually moving in the right direction,” he said. The region was showing “quite resilient demand,” in addition to which “we see more investment in the euro area than before.”