Key Takeaways
- European Central Bank (ECB) Governing Council member Martin Kocher believes the central bank's interest rate reduction cycle is either complete or very near its end.
- Kocher stressed the importance of the ECB maintaining flexibility and "keeping its powder dry" to respond effectively to potential future crises.
- The ECB's future monetary policy decisions will remain data-dependent, with no predetermined path for interest rates.
Martin Kocher, the governor of the Austrian National Bank and a member of the European Central Bank's (ECB) Governing Council, has indicated that the current cycle of interest rate cuts is largely concluded. In an interview with German magazine WirtschaftsWoche, Kocher stated, "I believe that we have reached the end of the interest rate reduction cycle or are at least very close to it." This sentiment was echoed in an earlier interview with the Financial Times, where he similarly noted that the easing of monetary policy was "either done or virtually done."
Kocher underscored the critical need for the ECB to preserve its capacity to act in the face of unforeseen economic challenges. He emphasized the importance of "keeping powder dry for potential crises," highlighting the necessity for vigilance amidst various sources of uncertainty. This cautious stance suggests a desire to maintain policy optionality rather than committing to further easing in the near term.
The ECB's Governing Council has consistently stated its commitment to a data-dependent, meeting-by-meeting approach for determining monetary policy. This means future interest rate decisions will be based on assessments of the inflation outlook, incoming economic and financial data, underlying inflation dynamics, and the strength of monetary policy transmission. The ECB's primary objective remains to ensure inflation stabilizes at its 2% medium-term target.
Recent ECB staff projections, as of September 2025, foresee headline inflation averaging 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027. For inflation excluding energy and food, projections are 2.4% in 2025, 1.9% in 2026, and 1.8% in 2027. The economy is projected to grow by 1.2% in 2025, with a slight revision upwards from previous expectations. These projections underpin the ECB's current assessment of a broadly stable inflation outlook, supporting the view that aggressive rate cuts may no longer be necessary.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.