ECB staff projections show inflation at roughly 2% now and slipping to about 1.7% next year — but Austria’s central bank governor Martin Kocher said it’s too early to tell whether the European Central Bank’s rate‑cutting cycle has ended. Kocher underscored the Governing Council’s data‑dependent approach as officials and markets await fresh inflation prints.

Officials keep options open Martin Kocher, governor of Austria’s central bank, told colleagues and markets that the ECB isn’t committed to a predetermined sequence of rate moves and that judging whether the bank’s easing cycle has finished is premature. Kocher’s comments reflect an emerging consensus among some Governing Council members that policy decisions must follow economic developments rather than a calendar. France’s central bank governor François Villeroy de Galhau put the point bluntly: "There is no predetermined path, but another rate cut is entirely possible at the coming meetings," he told BFM Business. Villeroy’s remark emphasises the Council’s willingness to leave the door open to further cuts if the data warrant them. Finland’s Olli Rehn, another member often identified with the dovish wing of the Governing Council, warned that lower energy prices and a stronger euro pose downside risks to inflation. Rehn’s view aligns with projections the ECB released that show inflation easing over the next two years — a development that could weigh on headline inflation if it continues. Latvia’s central bank governor Martins Kazāks highlighted the calendar of ECB meetings, saying the December meeting would be "rich" in information to assess whether inflation is moving away from the bank’s 2% aim. Kazāks pointed to risks ranging from shifts in the EU’s carbon trading rules to external factors such as cheaper Chinese imports and a firmer common currency. How markets are pricing the odds Financial markets have reacted by paring expectations for aggressive easing. Short‑term money markets now assign only a slim chance to further cuts soon, and traders have moved away from betting on a sizable loosening of policy. According to CryptoBriefing, the probability assigned to a 50 basis‑point or larger cut at the next policy meeting sits at essentially zero. Trading on that particular contract has been thin: only USDC 12 traded in the prior 24 hours, while CryptoBriefing noted it takes about USDC 65 to move the market probability by five percentage points. That sparsity of trading suggests two things: - Market participants haven’t found strong evidence that inflation will fall sharply enough to justify a large, immediate cut. - Prediction‑market prices can swing on modest flows, so they are a noisy signal rather than definitive proof of economists’ or officials’ intentions. ECB projections and the balance of risks The ECB’s most recent staff projections, released alongside the decision to hold rates steady, show inflation at roughly 2% now, falling to about 1.7% next year and rising slightly to 1.9% in 2027. Those point forecasts give the Governing Council some room to argue that price pressures are easing toward the bank’s target, but the path is uncertain and vulnerable to shocks. Officials singled out several upside and downside risks. A delay or policy shift in the EU’s carbon trading system could add roughly 0.3 percentage point to inflation projections, Kazāks warned. Conversely, cheaper energy and strong external disinflationary forces — including lower‑priced imports — could push inflation below target and make a cut more likely. That tension helps explain why the Council is reluctant to commit to a predetermined easing path and will weigh incoming data at each meeting.

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Officials say the December Governing Council meeting should be "rich" in information to assess whether inflation is moving away from the ECB’s 2% aim.

This article was created with AI assistance.