ECB's Kocher Says Must Prevent Inflation From Becoming Too High and Entrenched

European Central Bank Governing Council member Martin Kocher issued a clear warning on Thursday, stating that the central bank must act to prevent excessively high inflation levels from becoming entrenched in the economy. The remarks underscore policymakers' ongoing concerns about the risk of price instability.

**Inflation Risk Remains a Core Concern**

Kocher emphasized that despite tightening policy having been in place for some time, complacency toward the inflation outlook is unacceptable. He reiterated the importance of the persistence of inflation and noted that price stability is under threat. The comments align with his hawkish tone at the Jackson Hole global central bank symposium, where he said he remains "vigilant and not complacent." Market reports indicate that, due to disruptions from factors such as energy costs, the eurozone inflation rate remains well above the ECB's 2% target level.

**Economic Momentum Coexists with Fragility**

While warning of inflation risks, Kocher also painted a complex economic picture. He noted on Thursday that the eurozone economy remains fragile, and economic momentum has only increased slightly since the summer. This marks a subtle shift in wording compared with his assessment about a month ago that "the European economy is gaining more momentum," reflecting new headwinds to economic growth under a tight monetary environment. He had previously stated that the European economy is more resilient than many imagine.

**Policy Path Faces Trade-offs**

Kocher's latest assessment further highlights the difficult trade-offs within the ECB regarding the direction of monetary policy. On one hand, stubborn inflation requires the central bank to maintain a tightening stance to prevent it from becoming entrenched; on the other, fragile economic fundamentals limit the scope for rate hikes. Balancing inflation suppression against avoiding excessive economic downturn remains the core challenge for the ECB's future decisions.