ECB support to overcome euro effects
12 Sep 2017 - 0:00
Frankfurt: The European Central Bank believes its longterm support to the eurozone economy will overcome the strong euro’s braking effect on inflation, board member Benoit Coeure said yesterday.
Compared with previous central bank interventions, monetary policy “will remain more accommodative for longer,” Coeure told a Frankfurt conference, compensating for the impact of the euro’s appreciation.
The ECB’s historic low interest rates and ¤60bn ($72bn) of monthly bond purchases are designed to boost growth in the 19 nation single currency area, driving inflation towards policy makers’ goal of just under 2.0 percent.
Some observers have sounded the alarm as the euro appreciates against the dollar.
They argue that the stronger single currency will slow growth by making eurozone exports more expensive abroad and slow inflation directly by making imports cheaper.
The euro has strengthened in recent months as growth has picked up in the European economy, but currency markets are also pricing in their expectations that the ECB will begin winding down stimulus in the coming months.
ECB President Mario Draghi said Thursday that central bank governors would decide in October on the next steps for their “quantitative easing” (QE) bond-buying programme, currently slated to expire at the end of the year. How the euro develops against the dollar will flow into policy makers’ decision-making as their October meeting approaches.