The European economy is proving more resilient than widely anticipated, with growth accelerating in the second quarter despite geopolitical headwinds, European Central Bank Governing Council member Martin Kocher said on Friday.
Speaking to Bloomberg Television from the Federal Reserve's annual economic symposium in Jackson Hole, Wyoming, Kocher, who also heads Austria's central bank, noted that the euro area expanded by 0.4% in the three months through June, defying risks posed by the Middle East conflict. "The European economy is more resilient than many people think, showing some momentum now, increasingly momentum," he said.
Inflation dynamics remain a key focus for policymakers. Analysts estimate euro area inflation reached 3.3% in August, still well above the ECB's 2% target. Kocher emphasized the need for continued vigilance, stating there is "no room for complacency" on inflation risks, including potential second-round effects from rising wages.
Market expectations point to another policy tightening in September. Investors anticipate a 25-basis-point increase in the ECB's deposit facility rate, lifting it to 2.5%, which would mark the upper bound of a range considered neutral for economic activity. The ECB raised rates by 25 basis points in June, following prior tightening cycles aimed at curbing price pressures.
Energy costs have come under pressure due to the conflict in the Middle East, adding to inflationary pressures. Policymakers are monitoring the situation closely for signs of persistent inflationary pressures that could complicate the ECB's path toward price stability.
