The ECB fears that a strong euro harms financing conditions

The European Central Bank (ECB) is concerned about the excessive strength of the single currency. So said the Governing Council of the organism in the meeting held on 19 and 20 July, according to the minutes released on Thursday. The publication of this information contributed to depreciate the euro, which fell below $ 1.17, its lowest level in weeks.

Overall, financial conditions continued to support economic expansion. But price changes in some market segments, especially foreign currency and debt have caused some deterioration since the last meeting, “said the text published by the ECB, adding that members of the Governing Council of the Eurobanco they expressed their “concern” about the risk of excessive diversion upward in the future.

This concern makes the ECB does not want to send early signs about the next steps to withdraw the extraordinary measures put in place to address the economic emergency. “It was considered essential at this time to avoid sending signals that might delicate an overinterpretation” says the ECB, which highlights the unanimous vote of all its members to maintain the basic elements of its monetary policy.

The ECB considers still needed a very expansionary monetary policy to boost core inflation, that discounting the more volatile items such as energy and fresh foods. “The minutes of the meeting of the ECB say it is implausible that the Governing Council will tolerate a continued appreciation of the euro,” said Commerzbank analyst Michael Schubert EFE.

Those most responsible for European monetary policy also concerned about the erratic policies of US President, Donald Trump. “Concerns about risks have increased, were expressed specifically those related to political uncertainty in the US and the increasingly great risks on the balance sheets of some emerging economies,” concludes the note by the ECB.