De Gindos says the European Central Bank is relaxed around the strength of the euro, and the risk of very low inflation

Written by Palazas Korani and Franchisco Canaiba

Louis de Gwindos said that Frankfurt (Reuters) -Frank will affect the economic growth of the euro region for years, but there is little risk of low inflation, and even the euro increase against the dollar is not a great concern.

The European Central Bank indicated a temporary stoppage in the policy reduction this month despite expectations that show price growth without a temporary target of 2 % on the strong euro and low oil prices, which revived fears that the very low inflation environment for prenatal contract may return.

But De Guindos has reduced these concerns, on the pretext that the European Central Bank was finally at an amazing distance from its goal after years of reducing and exceeding.

“The risk of reducing the release is very limited in my opinion,” De Gindos told Reuters in an interview. “Our evaluation is that the risk of inflation is balanced.”

De Gindos said there is a major reason for the recovery of inflation to the target after a decrease to 1.4 % in the first quarter of 2026 is that the labor market remains narrow and that unions will continue to demand a healthy increase, while maintaining compensation growth by 3 %.

While De Guindos was explicitly arguing about a policy reduction, he said that financial investors, who are now betting on reducing the interest rate, and perhaps at the end of the year, have interpreted the message of European Central Bank President Christine Lagarde properly.

“The markets well understood what the president said about being in a good situation,” he said. “I think the markets believe that we are very close to our goal of 2 % in the medium term.”

The euro has increased by 11 % against the dollar in the past three months, as it reached its highest level in approximately four years at $ 1.1632 on Thursday.

In addition to dealing with the exporters another blow over the customs tariff, the euro can reduce the most powerful prices more.

But De Gindos said that the exchange rate was not volatile, and his appreciation was not quickly, two major measurements in his opinion.

“I think it is at $ 1.15, the euro exchange rate will not be a major obstacle,” said De Gindos, the former Spanish Minister of Economy and the longest member of the Board of Directors of the European Central Bank.

Reserve currency?

De Guindos poured cold water on the talk that the euro can soon challenge the situation of the dollar as the dominant currency in the world.

The euro area still lacks financial architecture or the defensive capabilities needed to become a real competitor, which will also limit its gains, another argument to face fears due to low inflation.