24.06.2025 06:19
Despite current economic circumstances, European Central Bank (ECB) board member François Villeroy de Galhau indicated on Tuesday that additional interest rate reductions remain a possibility. He cited moderate inflation expectations as a key factor influencing this assessment.
The recent rise in oil prices, while noteworthy, has been partially offset by the substantial appreciation of the euro, according to Villeroy de Galhau. Furthermore, he suggested that a confirmed ceasefire between Iran and Israel could potentially pave the way for further monetary policy easing within the next six months. He emphasized, however, that oil prices alone shouldn't solely dictate the ECB's response. A crucial distinction, he noted, lies between the neutral interest rate and the terminal rate, highlighting the complexity of the decision-making process. The ECB's approach, he concluded, will depend on ongoing economic developments.
At the time of this writing, the EUR/USD exchange rate experienced a 0.22% daily increase, reaching 1.1603. This reflects the market's reaction to Villeroy de Galhau's comments.
The euro, the currency shared by nineteen European Union countries within the Eurozone, holds the position of the world's second most actively traded currency, trailing only the US dollar. In 2022, it commanded a significant 31% share of global foreign exchange transactions, boasting an average daily turnover exceeding $2.2 trillion. The EUR/USD pair itself dominates global currency trading, accounting for an estimated 30% of all transactions. Other major pairs, though considerably smaller in volume, include EUR/JPY, EUR/GBP, and EUR/AUD.
Monetary policy for the Eurozone is overseen by the ECB, headquartered in Frankfurt, Germany. Its primary responsibility is maintaining price stability—a dual mandate encompassing inflation control and growth stimulation. Interest rate adjustments remain the ECB's principal tool for achieving this goal. Generally, higher interest rates, or the anticipation thereof, strengthen the euro, and conversely, lower rates weaken it. The ECB Governing Council, comprising heads of Eurozone national banks and six permanent members including ECB President Christine Lagarde, convenes eight times annually to determine monetary policy. Their decisions are informed by various economic indicators, including Eurozone inflation data, measured by the Harmonized Index of Consumer Prices.
