The recent appreciation of the euro is probably not enough to cause the European Central Bank (ECB) to reconsider its rate-cut plans, according to analysts at Evercore ISI as reported by Jin10. The analysis suggests that the current strength of the European currency against the dollar does not exert enough pressure on the ECB to change its monetary policy.

Experts indicate that very specific scenarios would be necessary to reverse the trajectory. A substantial decline in inflation expectations, driven by a significant weakening of demand, would be the first key factor. Additionally, the euro would need to appreciate considerably, reaching the 1.25 mark against the dollar, to exert real pressure on the central bank’s decisions.

Given the current situation, Evercore ISI believes that the ECB will likely keep interest rates steady throughout the year, maintaining a cautious approach to monetary policy. However, the risks are not balanced. The institution notes that the possibilities lean more toward rate cuts than hikes, signaling a market bias in that direction.

More adverse scenarios could lead to different outcomes. If the euro strengthens excessively, the ECB might consider a single rate cut as a relief measure. If, simultaneously, broader pressures related to declining inflation also materialize, the central bank would have room to implement two cuts, demonstrating policy flexibility as economic conditions evolve.