European Central Bank Committee: The impact of the euro's appreciation on the economy still needs to be observed, and there is currently no need to take action.

Member of the European Central Bank Governing Council and Governor of the Bank of Latvia, Martins Kazaks, stated that the European Central Bank is still observing the extent to which the euro's appreciation starting in 2025 will impact the economy. Kazaks mentioned in an interview that based on estimations, the effects of exchange rate changes typically take around 12 months to be fully felt, and that "we may see the full impact of last year's euro appreciation in late spring". In the first half of 2025, the euro appreciated by 14%, due to the unpredictable trade tariff policies of US President Trump, which weakened market confidence in the dollar and increased global uncertainty. Earlier this year, the euro continued to rise due to threats from the US towards Greenland, breaking the 1 euro to 1.20 dollar mark for the first time since 2021. Although most of the impact of the euro's appreciation has already been reflected in the European Central Bank's latest forecasts - which predict continued economic growth and stable inflation rates at the target level of 2% - decision-makers, including President Lagarde, have expressed vigilance and readiness to respond. Kazaks believes that the current situation does not require any action, as officials are in a "wait-and-see mode". He stated: "If you wish, you can say it's a form of attention, it's not verbal intervention, it's not at that stage yet." However, he did express concerns about the continued economic weakness making it harder for businesses and consumers to cope, saying, "I am very worried that the strengthening of the euro over the past year hasn't been because the euro area economy has been strong, but because uncertainty has increased and the dollar has weakened". In comparison to the US and China, Europe's issue is a lack of competitiveness, and resolving this issue would increase the economy's tolerance to a stronger currency. Following years of urging by Lagarde and her predecessors at the European Central Bank, European heads of states have finally started taking action. They discussed a roadmap on Thursday to strengthen the economic foundations of the EU. Kazaks also mentioned that the European Central Bank's current monetary policy settings are appropriate, and the risks to the outlook for inflation "might still be balanced". He added, "We are fully capable of acting in any direction when necessary, but now is not the time." The European Central Bank maintained the deposit rate at 2% last week, with economists and traders not expecting any changes in the near future.