Standard Chartered: Stronger Euro May Push ECB Toward Further Rate Cuts

The recent strength of the euro could increase the likelihood of further interest rate cuts by the European Central Bank, as easing inflationary pressures and improving financial conditions reshape the policy outlook, according to a new report from Standard Chartered.

In a research note, the UK-based lender said the euro’s sustained appreciation since the start of 2025 may provide policymakers with additional room to loosen monetary policy without jeopardizing price stability. 

The currency’s rise comes amid broad-based monetary easing implemented by the ECB over the past year.

The report argues that the stronger euro itself could help accelerate inflation’s return to the ECB’s 2% target by dampening imported price pressures. A firmer currency typically reduces the cost of foreign goods and energy imports, reinforcing the disinflationary trend already underway across the euro area.

Standard Chartered also highlighted Germany’s fiscal stimulus package introduced in 2026, which has supported growth momentum across the bloc. However, lingering uncertainty surrounding U.S. trade policy remains a downside risk to the region’s economic outlook.

Despite these external headwinds, the bank noted that inflation has been slowing faster than anticipated. Combined with the cumulative impact of roughly 200 basis points in rate cuts since June 2024, this trend strengthens the case for additional easing if the euro continues its upward trajectory.

“The euro’s appreciation may reduce the need to maintain restrictive monetary conditions,” the report said, suggesting that policymakers could adopt a more flexible stance to sustain economic activity.