FRANKFURT, GERMANY
\nA rising euro and falling inflation will present fresh challenges for the European Central Bank at its meeting Thursday, potentially reviving debate about if and when policymakers should start cutting interest rates.
\nThere is little doubt that the central bank for the 21-nation single-currency area will keep its benchmark rate on hold at two percent for its fifth straight meeting.
\nBut a marked strengthening of the euro last week, followed by news that eurozone inflation eased to 1.7 percent in January — below the ECB\u2019s two-percent target — will invite questions about whether rate cuts are on the horizon.
\nA stronger currency makes imports cheaper, which could drive inflation down even further — potentially leading consumers to delay purchases, with negative ripple effects across the economy.
\nBut a strong euro can also weigh on the eurozone\u2019s crucial exporters, particularly Germany, as it makes the cost of companies\u2019 goods pricier overseas. ECB President Christine Lagarde has at recent meetings emphasised that the central bank is in a \u201cgood place\u201d, seen as indicating that policymakers are happy with the current level of rates. But for Carsten Brzeski, an economist at ING, recent market developments \u201chave started to make the ECB\u2019s \u2018good place\u2019 a little less comfortable\u201d.
\n\u201cThe weakening of the US dollar and hence the strengthening of the euro have led to some unease at the bank,\u201d he noted.The euro has been gaining ground for some time, in particular due to worries about US President Donald Trump\u2019s volatile policies, from levelling tariffs against trading partners to threatening to seize Greenland. But it extended gains sharply last week as investors sold off the dollar, briefly hitting a four-and-a-half-year high above $1.20.<\/p>\n","protected":false},"excerpt":{"rendered":"
FRANKFURT, GERMANY A rising euro and falling inflation will present fresh challenges for the European Central Bank at its meeting Thursday, potentially reviving debate about if and when policymakers should start cutting interest rates. There is little doubt that the central bank for the 21-nation single-currency area will keep its benchmark rate on hold at […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-529798","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n