ECB's Kocher: Don't see evidence of second-round effects

European Central Bank (ECB) Governing Council member Martin Kocher said on Friday that he doesn’t see any hard evidence of second-round effects, but the central bank will act if the inflation outlook deteriorates. 

Meanwhile, Slovenian central bank chief Primož Dolenc said that the risks ahead remain high, adding that developments around the war in Iran reinforce the adverse risk.

Key quotes from ECB’s Kocher

Recent developments in oil markets are concerning. 

ECB is in a position to be vigilant for the next couple of weeks. 

I don't see any hard evidence of second-round effects. 

ECB will act if inflation outlook deteriorates. 

Growth forecast isn't great, but don't see a recession. 

Market reaction

At the time of writing, the EUR/USD pair is up 0.11% on the day to trade at 1.1385.

Kocher flags conditional tightening risk as inflation vigilance rises

Kocher’s 6.2/10 FXS Speechtracker score sits slightly below the 6.4/10 historic average, but the emphasis on acting “if the inflation outlook becomes worse” marks a mildly hawkish tilt versus recent communication. The focus on deteriorating medium-term inflation expectations, concern over oil market developments, and the pledge that the ECB “will act if the inflation outlook deteriorates” all reinforce a conditional tightening bias that can underpin the Euro on upside inflation surprises.

At the same time, the remark that there is “no hard evidence of second-round effects” and that growth is weak but not recessionary tempers the hawkishness, suggesting no rush to hike absent a clear shock. For FX, this mix of vigilance and patience implies the Euro may trade with a modest upside skew on inflation data and oil-driven repricing, but without a strong catalyst for a sustained repricing of the ECB path in the immediate term.