ECB Vice President Luis de Guindos provided insights into the current euro exchange rate and its implications for eurozone economic policy.
General Comments on Euro Exchange Rate
Luis de Guindos stated that the current euro level against the dollar, in the range of $1.17-$1.20, is not a cause for concern. However, he noted that a rise beyond $1.20 could pose challenges for economic policy, relating more to the pace of appreciation than to the current level.
Impact of Trump’s Tariff Policies on Euro
De Guindos noted that the euro has benefited from a weakening dollar due to President Trump's tariffs, leading to a 14% increase this year. He emphasized the need to prevent excessive appreciation to avoid worsening economic difficulties within the eurozone.
Inflation Expectations and ECB Policy
Looking ahead, de Guindos indicated inflation is likely to rebound to the 2% target despite a dip to 1.4% in the first quarter of 2026. He emphasized that factors like a strong labor market and wage growth will contribute to this recovery. Additionally, he dismissed concerns of a return to extremely low inflation, stating that the ECB is close to reaching its target.
De Guindos's remarks highlight the current state of the euro exchange rate and its impact on economic policy. Despite certain challenges, the ECB Vice President expresses confidence in the balance of inflation risks and achieving targeted levels.
