At its June meeting, the European Central Bank (ECB) decided to cut interest rates again. According to the meeting minutes, policymakers warned that a stronger euro could pose risks for exporters.
As the ECB notes, trade uncertainty is already clouding the economic outlook for the 20-nation eurozone, with particularly negative effects on investment.
The single currency’s nearly 14% rise this year has helped curb inflation in the region. However, further euro appreciation could push consumer prices below the ECB’s 2% target and hurt the competitiveness of export-oriented companies.
According to the latest forecasts from the European regulator, inflation will slow to 1.6% in 2026 before returning to the 2% mark in 2027. Meanwhile, the bloc’s economy is expected to grow due to increased government spending in Germany.