ECB’s Constancio says ECB has no forex target
The European Central Bank’s monetary policy includes no foreign exchange target and the euro’s effective exchange rate has risen less than it has just against the dollar, ECB Governing Council member Vitor Constancio said on Thursday.
“In monetary policy, we (the ECB) don’t have the exchange rate as a target,” Constancio said in an interview with Portugal’s SIC television, which was made available to Reuters before going on air later on Thursday.
Constancio was speaking as the euro
The European Central Bank has held interest rates steady as the US Federal Reserve has slashed monetary policy in the face of a sharp economic downturn after the subprime crisis erupted last year. The ECB is juggling high inflation against the possibility of the US slowdown sharply cutting European growth. The ECB has forecast euro-zone growth to slow this year to between 1.7% and 1.8%, compared with 2.2% in 2007. Constancio also noted inflation had risen in Europe, adding: “It is a worrying factor.” “The truth is that the inflation risks have risen and, after all, Europe’s growth situation is not as depressed as in the United States,” he said. The outlook for interest rates would depend on economic developments and inflation. “The future evolution (of rates) depends on the evolution of the economy and the risks to inflation,” he said. Constancio said that a strengthening of the euro exchange rate, if it is maintained, was “equivalent to an interest rate rise.” (Reuters)
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