ECB's Kocher Says Risks to Inflation Are Balanced

Watch ECB's Kocher Says Risks to Inflation Are Balanced - Bloomberg on Dailymotion

Transcript

00:00Are the risks to inflation in the euro area balanced to the upside or the downside? Tilted?

00:07So in the discussions that we had, that's also my assessment, I think the risks are more balanced now.

00:15The projections are more balanced now than a couple of months ago, that's important.

00:19Are they tilted in one direction more than the other?

00:22That's a difficult thing to assess.

00:26I think you always have the comparison between different points in time, and they are more balanced now.

00:32And personally, I think they are quite balanced in terms of upward and downward potential of inflation.

00:42And you've seen the projections of inflation in the euro area, they are actually pretty stable.

00:49That's actually remarkable.

00:49Also, the GDP projections, they were stable in comparison to the spring numbers.

00:56Given the level of uncertainty, it is surprising that we see the stability.

01:03And that's also the reason why we said, look, we shouldn't pre-commit to anything.

01:07We don't know what's going to happen.

01:08Perhaps the stability is just fooling us a bit.

01:10There's a meeting-by-meeting approach.

01:13There's no pre-commitment.

01:14We look at the data at the meeting, and we are ready to respond.

01:18But if there's no change, why should there be any response at the moment?

01:21We are fine where we are.

01:22But you revised down the inflation forecast for 2027.

01:27We wonder whether that should be taken as something significant, if that tells us that the risks are to the downside.

01:33So very slightly.

01:34So the revision down, we also up, there was a revision upwards for 2025, a slight one, a slight downward revision for 2027.

01:45To be honest, as an economist that did forecasts and projections myself, we shouldn't over-engineer that.

01:53The precision, especially for a two-year projection, once you have the status quo assumption, that's fine.

02:00But things change a lot.

02:01So there is no indication by the projections that anything changed in terms of the, that's my reading of it, in terms of the medium outlook.

02:09But, of course, given the uncertainty that we are facing in general, there might be changes quickly.

02:14Well, markets are currently pricing less than a 50% chance of another cut over the next 12 months.

02:19Is that about right?

02:23Markets are not always right, of course.

02:24But, again, this was a point prediction that you're mentioning, actually.

02:33In the end, the uncertainty is so high that we are facing in different dimensions that I wouldn't bet on that.

02:42There might be changes.

02:43But who knows?

02:44So keep your powder dry.

02:46Keep the powder dry.

02:47Be vigilant.

02:48That's important.

02:49Be vigilant to all the risks.

02:50I'm not downplaying the risks now, but I'm also not over-interpreting anything that happens.

02:57Meeting-by-meeting approach is, in my view, a very good way to assess the current situation.