Strong Euro No Problem

The European Central Bank believes its long-term support to the eurozone economy will overcome the strong euro’s braking effect on inflation, board member Benoit Coeure said, AFP reported. Compared with previous central bank interventions, monetary policy “will remain more accommodative for longer,” Coeure told a Frankfurt conference, compensating for the impact of the euro’s appreciation.  The ECB’s historic low interest rates and €60 billion ($72 billion) of monthly bond purchases are designed to boost growth in the 19-nation single currency area, driving inflation towards policymakers’ goal of just under 2%. Some observers have sounded the alarm as the euro appreciates against the dollar. They argue that the stronger single currency will slow growth by making eurozone exports more expensive abroad and slow inflation directly by making imports cheaper. The euro has strengthened in recent months as growth has picked up in the European economy, but currency markets are also pricing in their expectations that the ECB will begin winding down stimulus in the coming months.