ECB says euro’s volatility creating uncertainty across the eurozone
Frankfurt — European Central Bank (ECB) president Mario Draghi said on Thursday that volatility in the euro’s exchange rate was creating uncertainty and could affect the outlook for prices across the eurozone.
The euro has gained 13% against the dollar this year, a mixed blessing for the ECB as it reflects a robust economy but caps inflation by making exports less competitive and reducing the cost of imports.
"The recent volatility in the exchange rate represents a source of uncertainty that requires monitoring with regards to its possible implications for the medium-term outlook for price stability," Draghi said, talking at a media conference after the ECB’s policy conference.
The ECB would lay out its next stimulus moves this autumn, Draghi said, as the bank moves closer to an exit from the era of cheap money. "This autumn we will decide on the calibration of our policy instruments beyond the end of the year, taking into account the expected path of inflation and the financial conditions needed for a sustained return of inflation rates towards levels that are below, but close to, 2.0%."
The central bank kept key interest rates and its mass bond-buying programme unchanged on Thursday. Its governing council also voted to keep the benchmark "re-fi" refinancing rate at its all-time low of 0%, a spokesman said after a regular policy meeting.
As expected, policy makers also held the rate on its marginal lending facility unchanged at 0.25% and the rate on the deposit facility at minus 0.40% — meaning banks have to pay to park their excess cash with the ECB.
"The governing council expects the key ECB interest rates to remain at their present levels for an extended period of time," the ECB said in a statement. It also maintained plans to buy ¤60bn ($72bn) of corporate and government bonds per month until December under its "quantitative easing" programme.
The ¤2.3-trillion scheme aims to encourage spending and investment by pumping cash into the economy, as part of the ECB’s efforts to drive up growth and inflation.
Reuters and AFP