ECB’s Kocher rules out rate cuts as Sintra hawks soften

European Central Bank Governing Council member Martin Kocher said on Tuesday that the ECB's next policy decisions will come down to either raising interest rates further or keeping them steady, ruling out any return to easing as inflation pressures linger in the eurozone.x+1

Kocher's remarks, delivered on the sidelines of the ECB Forum on Central Banking in Sintra, Portugal, came as a chorus of fellow policymakers pushed back against the need for imminent further tightening, suggesting the June rate hike may stand alone for now.ecb.europa+1

Dovish Voices Dominate Sintra

The clearest signal came from Latvia's Martins Kazaks, who told Bloomberg there is "no urgency" to hike again in July, noting that peace efforts in the Middle East have sent oil prices lower and reduced inflation risks. Belgium's Pierre Wunsch echoed the sentiment, saying the case for another hike is "not as strong" as it appeared after the June meeting, though he added that if one is needed, the ECB should "move quickly."econostream-media+2

Malta's Alexander Demarco had earlier signaled that with inflation expectations "quite well anchored," there is no present need for many follow-up rate increases after the June decision.bloomberg

Nagel Keeps Options Open

Bundesbank President Joachim Nagel struck a more cautious tone. Speaking to CNBC in Sintra, he warned that the energy price shock from the Middle East conflict "is still in the system" and that inflation will remain "significantly above our target" through 2026, staying elevated in 2027 before returning to the 2% goal in 2028. However, he declined to endorse further hikes, saying "it is too early to make such a call" and that he would "keep all optionalities open" for the July and September meetings.econostream-media+3

The ECB raised its deposit facility rate by 25 basis points to 2.25% on June 11 — its first hike since September 2023 — after the Iran war drove eurozone inflation to 3.2% in May. Staff projections now see headline inflation averaging 3.0% in 2026 and 2.3% in 2027.euronews+2

Markets are pricing in a hold at the July 23 meeting, with prediction markets showing a 96% probability of no change, while a September hike remains roughly a coin toss. The recent retreat in oil prices, driven by renewed U.S.-Iran diplomatic contacts, has eased the pressure on policymakers to act again soon.cnbc+3