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Draghi: Further euro rise would require more easing

  • The continued strengthening of the euro "would require further monetary policy accommodation," ECB President Mario Draghi has said. "That's an important dimension for our price stability."
  • Draghi's comments came at a meeting of the IMF and after the euro has increased 6% over the past year to $1.3885.
  • Draghi said that the euro's strength has been an important factor in causing eurozone inflation to drop to 0.5% on year.
  • CPI is even negative in some parts of the bloc, sparking increasing concerns about deflation and prompting the ECB to discuss unconventional policy such as quantitative easing.
  • Meanwhile, German Finance Minister Wolfgang Schaeuble and Bundesbank President Jens Weidmann have tried to talk markets out of being overly excited that the eurozone crisis is over. "It's good that markets have become more confident again," said Schaeuble. "But I've said that in parts they're already exaggerating again."
  • ETFs: FXE, VGK, EUO, FEZ, ERO, EU, IEV, EPV, EUFN, EZU, HEDJ, DRR, FEU, FEP, UPV, EUFX, ULE, ADRU, URR, FEEU, EURL, EURZ, DBEU, FIEU
Comments (5)
  • Philip Mause
    , contributor
    Comments (3595) | Send Message
     
    This is a bit unusual in that Central Banks generally seem to take the position that they do not use monetary policy to affect exchange rates. Obviously, the appreciation of a currency tends to reduce the danger of inflation and may even create a danger of deflation and it also tends to slow an economy down by reducing exports and making it harder to compete with imports. But I have not seen many bankers refer directly to exchange rates as a rationale for policy. Obviously, there is a "beggar thy neighbor" danger here because other Central Banks can take countervailing policy measures to prevent their own currencies from appreciating. This, of course, reinforces the notion that we will have expansive monetary policy in the developed economies for a long time.
    13 Apr, 02:35 PM Reply Like
  • TS Nelson
    , contributor
    Comments (372) | Send Message
     
    All very well except that you cannot have expansive monetary policy for a long time without negative repercussions. The fact that it is nearly impossible to predict where the next bubble will form when and why it will burst, does not mean that it wasn't created by expansive monetary policy.
    13 Apr, 04:13 PM Reply Like
  • Ajayyy
    , contributor
    Comments (327) | Send Message
     
    I feel like this is a planned move. Draghi is mentally preparing -himself and us- for a move that EU has previously been very clearly against.

     

    They will definitely be taking steps towards some sort of QE.
    13 Apr, 07:17 PM Reply Like
  • blablah
    , contributor
    Comments (35) | Send Message
     
    They have been sending signals for many months now.
    13 Apr, 09:46 PM Reply Like
  • TS Nelson
    , contributor
    Comments (372) | Send Message
     
    It's illegal though for the ECB to purchase government debt. That's a legacy of the Bundesbank, one of the pillars of which the lasting success of this historically unique institution rested.
    And the reason why that is illegal is the hyperinflation during the Weimarer Republik. But apparently everybody has forgotten about it now and "this time it's different" so the lesson needs to be learned again.
    14 Apr, 12:42 AM Reply Like
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