Kocher is arguing his standpoint based on the impact of a stronger euro on inflation pressures. He says that:
“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. 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.”
The single currency has hit a four-and-a-half year high against the dollar this week, with EUR/USD clipping above the 1.2000 mark for the first time since June 2021. And the pressure on the dollar continues to grow amid a myriad of factors, with added pressure coming from potential intervention from Tokyo.
In describing the recent gains in the euro, Kocher said that they were “modest” and doesn’t need any responding just yet. But he reaffirmed that at some point, the ECB might have to take action and that they will retain “full optionality” on how to go about that.
As a reminder, ECB vice president Luis de Guindos last year hinted that EUR/USD hitting 1.2000 would make things “complicated” for the central bank. And now, here we are.
