The European Central Bank would need to consider another interest rate cut if further increases in the value of the euro start affecting inflation forecasts, one of its governing council members said.
Austrian central bank governor Martin Kocher called recent gains by the single currency against the dollar “modest” and said they did not necessitate any response. But the ECB may need to act if any further increases were significant enough to lower inflation projections, he said in an interview, as he vowed to keep “full optionality” on monetary policy moves.
“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 told the FT. “But not because of the exchange rate itself, but because the exchange rate translates into less inflation, and then this is of course a monetary policy issue.”