AMB Decisions: The Role of the Euro and Its Impact on Monetary Policy

Will the ECB Keep Interest Rates Unchanged at the February Meeting?

The European Central Bank's (ECB) February 2024 meeting is expected to keep policy interest rates unchanged. This decision is believed to reflect the ECB's likely continued stance in the future.

Economic Data and the Rise of the Euro

Published data indicates that the Eurozone economy is in a healthy condition. The improvement in economic activity supports expectations that the ECB will keep interest rates stable. However, the rising euro's inflation reducing effect could potentially influence the bank's future decisions.

Assessments from Peter Vanden Houte

ING Group Chief Economist Peter Vanden Houte noted that the Eurozone economy showed a growth of 0.3% in the last quarter of 2025, stating that the European Commission's economic confidence index data for January exceeded expectations. Houte said, "The published data supports the quest for stability in interest rates."

The Strengthening Euro and the ECB

Houte also emphasized that recent developments have started to cause discomfort regarding the ECB's "good position." The strengthening euro as a result of the weakening US Dollar is creating unease at the ECB.

Clues from François Villeroy de Galhau

Bank of France Governor François Villeroy de Galhau suggested that the strengthening euro could be an important factor in guiding monetary policy. Houte indicated that considering the effects of the euro/dollar parity rising to 1.25, pressures for interest rate cuts may increase.

Marco Wagner: ECB's Market Assessment

Commerzbank Senior Economist Marco Wagner expressed that the ECB meeting will pass without incident and there is no expectation for interest rate cuts within the year. Wagner pointed out that the euro/dollar parity exceeding 1.18 could affect the ECB's projections.

Stability of Euro's Value Increases

Rabobank Senior Macro Strategist Bas van Geffen expects the ECB to keep interest rates unchanged until 2026. Additionally, he mentioned that the strengthening of the euro might require verbal interventions.

Conclusion

For ECB officials, how to assess market movements and the effects of the euro/dollar parity remain a significant area of interest. Fluctuations in the euro could play a critical role in determining interest rate policies.