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European Central Bank hits out at Washington for talking down dollar

Striking a moderately dovish tone, Draghi also pushed back on rate hike expectations

Reuters  |  Frankfurt 

A commuter train passes over a bridge next to the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Photo: Reuters
A commuter train passes over a bridge next to the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Photo: Reuters

chief took a swipe at Washington on Thursday for talking down the dollar, a move he said threated a decades-old pact not to target the currency and might force his bank to change its own policy. Singling out the euro’s surge as a source of uncertainty, Draghi said any unjustified move could force the to rethink its strategy as a strong currency could put a lid on inflation, thwarting its efforts to lift prices. He was speaking after this week said he welcomed a weak dollar because it was good for U.

S. trade, and said “US troops are now coming to the ramparts” in global trade wars. That sentiment sent the euro to three-year highs against the dollar. Striking a moderately dovish tone, Draghi also pushed back on rate hike expectations, arguing there was almost no chance of a move this year, even as some investors were betting on a rise as early as December. But it was his comments on currency that resonnated most from a news conference following the ECB’s regular policy meeting. “When someone says that basically a good exchange rate is good for exporters and it’s good for the economy and it’s good, that means it’s targeting the exchange rate,” Draghi said when asked about Mnuchin’s comments. “That agreement (about not targeting the exchange rate), as subtle as you want, has been in place for decades now,” Draghi added. The is especially sensitive to the euro’s moves as any big rise in the currency could cut into inflation, threatening to reverse the impact of the very stimulus the bank has been providing over the past three years. The euro had risen, Draghi argued, partly because of ”the use of language in discussing exchange rate developments that doesn’t reflect the terms of reference that have been agreed.

First Published: Fri, January 26 2018. 00:26 IST
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