ECB Vice President De Guindos Dismisses Euro Strength Inflation Risks

European Central Bank Vice President Luis de Guindos expressed confidence that inflation risks are balanced despite recent concerns about a potential dip below the ECB's 2% target and the euro's recent appreciation against the dollar. He stated that the risk of inflation undershooting is very limited, forecasting inflation to rebound after falling to 1.4% in early 2026, supported by a tight labor market and sustained wage growth near 3%, driven by union demands. De Guindos downplayed the impact of the euro's appreciation, noting that its rise has been neither rapid nor volatile and thus does not pose a significant obstacle to achieving the inflation target. While the ECB paused its policy easing this month, markets have interpreted ECB President Christine Lagarde's messaging as signaling that the ECB is close to its sustainable 2% inflation target, with expectations for potentially one more interest rate cut later this year. Additionally, de Guindos acknowledged that tariffs will weigh on eurozone economic growth and prices for years but emphasized confidence that inflation will not fall too low. Overall, the ECB's outlook remains cautiously optimistic about maintaining price stability amid external challenges.