The European Central Bank is widely expected to keep interest rates unchanged on Thursday, as policymakers weigh the impact of a stronger euro and a wave of low-priced Chinese imports on the inflation outlook. Data released Wednesday showed euro area inflation eased to 1.7% in January, the lowest since September 2024, while core inflation unexpectedly slipped to 2.2%, its lowest level since October 2021. The ECB has held policy steady since June, and markets see little scope for near-term shifts as the eurozone economy shows signs of resilience and inflation remains close to target, with President Christine Lagarde expected to reiterate that policy is in a “good place.” Still, the euro’s recent rally has sparked concern within the Governing Council: Austria’s Martin Kocher warned that further appreciation could push the ECB to resume rate cuts, while France’s François Villeroy de Galhau pointed to the dollar’s recent depreciation as a key factor shaping the bank’s outlook.
