ECB may need fresh rate cut if euro strengthens, says Austrian central bank governor
Recent gains against the US dollar were ‘modest’ and did not require a response, he adds
[BRUSSELS] The European Central Bank may need to consider another interest rate cut if further gains in the euro begin to weigh on the bank’s inflation outlook, Austrian central bank governor Martin Kocher told the Financial Times.
Recent gains against the dollar were “modest” and did not require a response, Kocher said in an interview published on Wednesday (Jan 28), warning that sharper appreciation could lower inflation projections and force the ECB to act.
“If the euro appreciates further and further, at some stage this might create of course a certain necessity to react in terms of monetary policy,” Kocher added.
A stronger euro would reduce import prices and erode competitiveness against US competitors, he said.
Despite this, Kocher said the eurozone economy had been more resilient than expected and he was “cautiously optimistic” about growth this year, the newspaper added.
Speaking ahead of ECB’s February 4 meeting, he said there was no immediate need to change rates but stressed the importance of keeping “full optionality” amid uncertainty, it said. REUTERS
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