Dutch International: Strong Euro Could Still Force the European Central Bank to Intervene

Carsten Brzeski of the Dutch international group stated in a report that remarks by European Central Bank President Christine Lagarde suggest that a strong euro could still force the bank to restart its interest rate cutting cycle. The bank kept its key interest rate unchanged at 2% on Thursday. He said that if the euro strengthens again by the March meeting, for example rising to 1.25 US dollars, the ECB's inflation forecast will likely show inflation rates remaining below 2% for three years, possibly even below 1.8%. "While no one would consider this a deflation risk, inflation rates below target could raise doubts about how symmetric the ECB's inflation target really is." Brzeski said that this situation could prompt policymakers to take preventive interest rate cuts.