ECB's Kocher: Oil near $100 into year-end forces more rate hikes

Summary

• Austria's Kocher warned the ECB must hike again if oil holds near $100 through December.
• The ECB raised rates a quarter point to 2.5% on Thursday, its second move in three months.
• Crude is up more than 45% since the US-Iran ceasefire collapsed in early July.

The latest

The European Central Bank would have to raise borrowing costs again if crude keeps hovering around $100 a barrel until year-end, Austrian central bank governor and ECB Governing Council member Martin Kocher told the Financial Times in an interview published on 12 September 2026. He said inflation risk is higher than it was a few months ago, with Middle East tensions unresolved and energy prices elevated.

Details

• The decision: The ECB lifted borrowing costs by 25 basis points to 2.5% on Thursday, its second increase in three months and the second this year. Kocher's interview came two days later, framing the move as potentially insufficient if energy prices stay where they are.
• The energy shock: Oil prices have jumped more than 45% to above $100 a barrel since the collapse of the US-Iran ceasefire at the start of July, according to the Financial Times. European gas prices have roughly doubled since June, to just under €80 per megawatt hour.
• The worst case: The ECB's most pessimistic scenario assumes oil averaging $99 a barrel between October and December and gas at €77 per megawatt hour. Under those assumptions inflation climbs to 3.2% next year, overshooting the 2% target for a second consecutive year.
• The baseline: The bank's central scenario has inflation returning to 2% by the end of next year, conditional on crude averaging around $90 in the fourth quarter. The gap between the two paths is roughly $9 a barrel.
• Kocher's caveat: He acknowledged a temporary inflation spike may be unavoidable, calling the oil surge a supply shock outside the bank's control, and said Europeans must live with relatively high inflation in the short term. He insisted that period stay short, with inflation back at target within roughly a year.
• Second-round effects: Kocher said there is no clear evidence yet that higher energy costs are feeding into broader prices and wages. He warned that "second-round effects" become more likely the longer Middle East tensions persist, and said the bank is watching wage trends and employee compensation closely.
• Market pricing: Investors are betting on an additional quarter-point increase to 2.75% by year-end, followed by another hike in the first half of 2027, according to Reuters data. Traders on Friday also raised their bets on a US Federal Reserve increase next week.
• G7 divergence: Only the ECB and the Bank of Japan have so far responded to the inflationary pressure generated by the Iran war among G7 central banks, leaving the euro area and Japan ahead of their peers in tightening against the energy shock.
• The calendar: Kocher said it is too early to discuss the bank's stance at its next meeting at the end of October or at the December session. The ECB holds no monetary policy meeting in November.

Between the lines

The difference between the ECB's two scenarios is about $9 a barrel, which is why Kocher ties further tightening directly to where crude settles rather than to any domestic demand signal. His stress on wage trends suggests the trigger for another hike would be evidence of pass-through, not the oil price alone.

What's next

The ECB's next policy meeting falls at the end of October, with no November session. Watch fourth-quarter oil and gas averages against the $99 and €77 thresholds, and the Federal Reserve's decision next week.

Source: Financial Times, Reuters