European Central Bank warning about the euro
European Central Bank warning about the euro
2026-02-06
One of the European Central Bank’s policymakers, Martins Casax, warned that a large and rapid rise in the value of the euro could call for a monetary policy response.
In a post on Friday, Casaks said that the European Central Bank’s governing council does not target a specific exchange rate level, but that a significant strengthening of the euro could lead to a reduction in inflation expectations.
He explained that a stronger currency makes imports cheaper, which eases price pressures and reduces imported inflation, and also limits companies’ ability to raise prices in the face of declining demand.
He added that the strength of the euro could negatively affect economic activity by weakening the competitiveness of European exports, as European products become more expensive in global markets, which could lead to a decline in external demand, a decrease in industrial production, and put pressure on corporate profits, investment, and employment.
Kazakis noted that the euro-dollar exchange rate has moved within a narrow range over the past few months, pointing out that the last significant rise occurred in the second quarter of 2025 and appears to be continuing. He stated that the full effects of this rise on inflation may become clearer next spring, although these effects have already been factored into the European Central Bank’s baseline forecasts.
Yesterday, the European Central Bank kept interest rates unchanged at 2% on bank deposits, in line with expectations, a move reflecting the continuation of its current monetary policy.
burathanews.com
