5:51 6 February 2026
Euro strength clouds outlook
A stronger euro could push inflation below target, Christine Lagarde warned after the latest policy meeting of the European Central Bank. She said price dynamics and monetary settings are broadly aligned, but the outlook is unusually uncertain.
Tariffs and weaker foreign demand could curb exports, while excess global capacity may channel more goods into the euro area, easing prices. A firmer currency and more risk-averse markets could further dampen demand. Conversely, energy spikes, disrupted supply chains, wage stickiness in services, higher defense and infrastructure spending, and climate shocks could lift inflation.
The Governing Council kept rates unchanged: the deposit rate at 2.00%, refinancing at 2.15%, and the marginal lending rate at 2.40%. The decision was unanimous, with long-term inflation expectations near 2%.
Lagarde stressed the ECB does not target the exchange rate but monitors it closely. After the briefing, the euro edged up to 1.1813 against the dollar, while 10-year German Bund yields rose to 2.86%.
