The ECB relaxes about the strength of the euro and risks inflation being too low, says De Guindos
By Balazs Koranyi and Francesco Canepa
Frankfurt (Reuters) – Exam candidates will strain eurozone economic growth and long-standing prices, but there is little risk of lower inflation. And even the euro surge against the dollar is not a big concern, said European Central Bank Vice President Luis de Gindes.
The ECB has suspended policy easing this month, despite forecasts showing strong euro prices and low oil prices that temporarily show price growth below 2%, reviving concerns that a decade-old pre-pandemic ultra-low inflation environment will return.
However, De Gindes downplayed these fears, claiming that the ECB was ultimately within a prominent distance from the target after years of underestimation and excessive overshooting.
“In my opinion, the risks of filming are very limited,” Degindos told Reuters in an interview. “Our assessment shows that inflation risk is balanced.”
After immersing in 1.4% in the first quarter of 2026, the main reason inflation rebounds to the target is that the labor market is tough, unions maintain healthy growth and the increase in compensation is maintained at 3%, De Guindos argued.
De Guindos did not expressly insist on suspending the policy easing, but he said he correctly interpreted ECB President Christine Lagarde’s message, betting on another interest rate cut, perhaps leading up to the end of the year.
“The markets fully understand what the president said about being in a good position,” he said. “We believe the market is very close to our sustainable 2% inflation target over the medium term, and I think it’s a discount.”
The euro has risen 11% against a dollar in the last three months, reaching its highest level in nearly four years at $1.1632 on Thursday.
Not only will it deal with exporters, but it will also take another blow to US tariffs, the stronger euro could further reduce import prices.
However, De Guindos said the exchange rate was not volatile and its valuation was not rapid.
“At $1.15, I don’t think the euro exchange rate is a major obstacle,” said De Guindos, former Spanish economy minister and longest member of the ECB board of directors.
Reserve currency?
De Guindos poured cold water on the story that the euro could quickly challenge the dollar’s status as the dominant currency in the world.
The Eurozone still lacks the financial building or defensive capabilities needed to be a real challenger, which intends to limit profits.