ECB policymaker Peter Kazimir believes there is no need to change monetary policy in the next meeting. He stressed that adjusting interest rates, especially in December, is unnecessary. Kazimir also pointed out that the effect of foreign exchange on prices may not be as strong as expected. He added that it is increasingly important to watch for potential upward risks to avoid causing unnecessary uncertainty in policy.

The Euro’s Stability

After Kazimir’s comments, the Euro remained steady at about 1.1660 against the US Dollar, showing that his words did not significantly affect the Euro’s value. The European Central Bank (ECB), based in Frankfurt, manages monetary policy for the Eurozone. Its main goal is to keep prices stable, aiming for inflation around 2% by adjusting interest rates. The ECB Governing Council, which meets eight times a year, makes policy decisions with input from national bank heads and ECB President Christine Lagarde. Quantitative Easing (QE) means the ECB buys assets to increase liquidity, usually causing the Euro to weaken. Conversely, Quantitative Tightening (QT) reduces liquidity and typically strengthens the Euro during economic recovery.

The ECB’s Rate Strategy

The European Central Bank is expected to keep interest rates steady during the December meeting, reducing short-term uncertainty in the market. The deposit rate has remained at 3.75% since the last change in July 2024, indicating that a prolonged pause is likely, which suggests the central bank will avoid sudden moves. This decision is supported by recent data. The November 2025 flash estimate for Eurozone inflation was 2.4%. Although this is much lower than the peaks in 2022, it still exceeds the 2% target. With third-quarter GDP growth for 2025 at just 0.1%, there is little justification for increasing rates and risking a recession, while there is also no room to cut them yet. For derivative traders, this hints that implied volatility on euro-related assets may decrease in the coming weeks. Strategies that perform well in low volatility, such as selling short-dated strangles on the EUR/USD, could be a good choice. The central bank’s focus on stability suggests that large and unexpected price changes are less likely. Looking ahead, the forward markets reflect a belief in this extended pause. Current pricing shows a less than 25% chance of a rate cut before mid-2026, indicating that betting on big rate changes in early or mid-2024 may not be profitable. Create your live VT Markets account and start trading now.

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