|
Coeure's comments suggest that policymakers are relatively
relaxed about the currency's 14 percent rise against the dollar
<EUR=> this year, even as ECB President Mario Draghi singled out
the exchange rate last week as a source of uncertainty which
requires monitoring.
"Compared with past demand shocks, policy will remain more
accommodative for longer, thereby likely muting further the
pass-through of any growth-driven exchange rate appreciation,"
Coeure told a conference in Frankfurt.
"And with the current recovery in the euro area being largely
driven by domestic demand, euro strength may also have less of
an impact on growth than, for example, after the Great Financial
Crisis," he added.
The ECB targets inflation at almost 2 percent over the 'medium
term', an undefined concept that is influenced by the size of
any inflation shock.
The bank has undershot its price growth target for four and a
half years and will not raise inflation back toward 2 percent
before 2020, its new projections from last week show.
Still, it is expected to curb stimulus when policymakers meet in
October as the threat of deflation is long gone and growth is
far better than policymakers expected just a few months ago.
"At the current juncture, however, the policy-relevant horizon –
the 'medium term' concept in our monetary policy strategy – is
likely to be longer given the persistence of subdued
inflationary pressures," Coeure said.
Although seemingly relaxed about the currency appreciation,
Coeure also warned that a persistent external shock could
meaningfully alter the inflation outlook.
"Exogenous shocks to the exchange rate, if persistent, can lead
to an unwarranted tightening of financial conditions with
undesirable consequences for the inflation outlook."
(Reporting by Balazs Koranyi; Editing by Mark Trevelyan)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
|
