The European Central Bank (ECB) may have to consider another interest rate cut if further appreciation of the euro begins to put pressure on the institution's inflation forecasts. This was stated by Martin Kocher, governor of the Austrian central bank and a member of the ECB's Governing Council, to the “Financial Times“, quoted by Reuters, BTA reported.
The euro's previous appreciation against the dollar has been “moderate“ and did not require a reaction, Kocher said, warning that a sharper appreciation could lower inflation forecasts and force the ECB to take actions.
“If the euro continues to appreciate further, at some point this may of course create a need for a monetary policy response“, Kocher added.“
A more expensive euro would reduce import prices and undermine competitiveness against US competitors, he said.
Kocher pointed out that the euro zone economy had been more resilient than expected and expressed “cautious optimism“ about economic growth this year.
Speaking ahead of the ECB meeting on February 4, he said there was no immediate need to change interest rates but stressed the importance of maintaining “full flexibility“ given the uncertainty.
Yesterday, the euro rose to $1.20 for the first time since mid-2021, Reuters recalls.