European Central Bank Considers Potential Measures Amid Rapid Euro Appreciation

A member of the European Central Bank (ECB) has warned about the implications of the euro's rapid appreciation, suggesting that continued strength in the currency may prompt the bank to reassess its monetary policy in the near future.

Concerns Over Euro Strength Impacting Inflation

Martins Kazaks, an ECB council member, stated that while the bank does not aim for a specific euro exchange rate, a substantial increase could result in lower inflation forecasts for the eurozone.
He explained that the strengthening of the euro makes imports cheaper, which helps alleviate price pressures and reduces imported inflation rates, while also limiting companies' ability to raise prices due to decreased demand.

Potential Economic Growth Implications

Kazaks noted that a strong euro could negatively affect economic performance by diminishing the competitiveness of European exports in global markets, where European goods become more expensive compared to competitors. This could lead to reduced external demand and a decline in industrial production.
He added that these factors could exert pressure on corporate profits and levels of investment and employment across eurozone countries.

Monitoring Currency Movements

The ECB official pointed out that the euro's exchange rate against the dollar has remained within a limited range in recent months but has seen a notable increase since the second quarter of 2025. He anticipates that the full effects of this rise on inflation rates will become clearer by next spring.

Interest Rates Held Steady

The European Central Bank has opted to keep interest rates unchanged at 2% for bank deposits, a decision that aligns with market expectations and reflects the continuation of current monetary policy while monitoring economic and inflationary developments.