Published by Global Banking & Finance Review®
Posted on February 6, 2026
2 min readLast updated: February 6, 2026
Add as preferred source on GoogleECB's Kazaks warns that a strong euro could lead to policy changes, impacting inflation and economic activity. The ECB is monitoring exchange rates closely.
BERLIN, Feb 6 (Reuters) - A significant appreciation of the euro could trigger a monetary policy response from the European Central Bank, wrote ECB policymaker Martins Kazaks in a blog post on Friday.
While the ECB Governing Council does not pursue a specific exchange rate target, "a sizeable and pacey euro strengthening would lower inflation outlook via weakening competitiveness and economic activity, thereby potentially triggering a policy response," he wrote.
Kazaks noted that the euro-dollar exchange rate has fluctuated within a relatively narrow range in recent months, with the last significant appreciation occurring in the second quarter of 2025, which currently appears to be permanent.
Due to time lags, the peak effect of this appreciation on inflation will only become visible in spring, he said.
However, this has already been taken into account in the ECB's baseline forecast, added the Latvian governor.
The European Central Bank left interest rates on hold as expected on Thursday.
ECB President Christine Lagarde said at a press conference after the rate announcement that the Governing Council did spend time discussing exchange rate moves after the dollar tumbled last week.
Asked about the currency, Lagarde said the ECB was keeping a close eye on markets but ultimately concluded that no big change has taken place in recent months.
(Reporting by Reinhard Becker and Ludwig Burger Writing by Miranda MurrayEditing by Linda Pasquini)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to influence economic activity.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
The European Central Bank (ECB) is the central bank for the euro, responsible for monetary policy within the Eurozone.
A foreign exchange rate is the price of one currency in terms of another, determining how much of one currency can be exchanged for another.
Interest rates are crucial as they influence borrowing costs, consumer spending, and overall economic growth.
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