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Rising euro, falling inflation in focus at ECB meeting Estelle.Bronkhorst Thu, 02/05/2026 - 06:00 BRUSSELS - A rising euro and falling inflation will present fresh challenges for the European Central Bank at its meeting on Thursday, potentially reviving debate about if and when policymakers should start cutting interest rates.There is little doubt that the central bank for the 21-nation single-currency area will keep its benchmark rate on hold at two percent for its fifth straight meeting.But a marked strengthening of the euro last week, followed by news that eurozone inflation eased to 1.7 percent in January -- below the ECB s two-percent target -- will invite questions about whether rate cuts are on the horizon.A stronger currency makes imports cheaper, which could drive inflation down even further -- potentially leading consumers to delay purchases, with negative ripple effects across the economy.But a strong euro can also weigh on the eurozone s crucial exporters, particularly Germany, as it makes the cost of companies goods pricier overseas.It could thus hit the eurozone economy at a time growth is starting to get back on track, potentially undermining efforts to close the gap with China and the United States.ECB President Christine Lagarde has at recent meetings emphasised that the central bank is in a good place , seen as indicating that policymakers are happy with the current level of rates.But for Carsten Brzeski, an economist at ING, recent market developments have started to make the ECB s good place a little less comfortable . The weakening of the US dollar and hence the strengthening of the euro have led to some unease at the bank, he noted.The euro has been gaining ground for some time, in particular due to worries about US President Donald Trump s volatile policies, from levelling tariffs against trading partners to threatening to seize Greenland.But it extended gains sharply last week as investors sold off the dollar, briefly hitting a four-and-a-half-year high above $1.20.

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