Euro Movements at the ECB Meeting Will Affect Interest Rate Decisions

ECB's February Meeting and Expectations Regarding Interest Rate Policy

The European Central Bank (ECB) is widely expected to keep its policy interest rates stable during the February meeting. In this process, it is anticipated that the ECB will maintain its current stance on interest rate policy for some time longer.

Economic Data and Its Impact on Interest Rates

The published economic data indicates that economic activity in the Eurozone is healthy. However, the strengthening of the euro may have a dampening effect on inflation, potentially influencing the ECB's decisions. ING Group Chief Economist Peter Vanden Houte emphasized that the Eurozone economy is expected to grow by 0.3% in the last quarter of 2025, and that the economic sentiment index performed better than expected in January. Houte stated, "This data supports a search for stability in interest rates."

The Strengthening of the Euro and Developments in Monetary Policy

However, currency fluctuations in the markets and the ECB's position are becoming more complex. Houte mentioned that the weakening of the US dollar could lead to unrest at the ECB due to the rise of the euro.

The President of the French Central Bank, François Villeroy de Galhau, expressed that the strengthening euro could shape monetary policy in the coming months, noting that, "In the ECB's December report, it was indicated that if the euro reaches 1.25 against the dollar, it would reduce inflation by 0.2 points. If this level is reached, pressures for interest rate cuts may increase,” he stated.

ECB's Evaluation of Market Movements

Commerzbank Senior Economist Marco Wagner emphasized that they expect an uneventful ECB monetary policy meeting. It seems unlikely that there will be a significant interest rate cut for the remainder of the year. The euro/dollar exchange rate surpassing 1.18 is noteworthy.

Wagner noted that the ECB's projections expect the euro/dollar exchange rate to be around 1.16, stating, "If the euro continues to appreciate, the ECB's projections may gradually be affected.”

Durability of the Euro's Appreciation

Rabobank Senior Macro Strategist Bas van Geffen projected that the ECB would keep interest rates stable until 2026. He also stated that the appreciation of the euro could reduce current inflationary pressures.

Natixis Head of European Macro Research Alain Durre anticipates that the ECB will keep rates unchanged. Durre remarked, "The combination of a strong euro and low energy prices may prompt the ECB to consider interest rate cuts,” he stated.

ABN AMRO Senior Economist Jan-Paul van de Kerke indicated that the euro's strength is largely due to the weakness of the dollar. Kerke stated, "Our base scenario is that the euro/dollar will rise, but we expect monetary policy to remain unchanged," he explained.