European Economy: ECB has interest in strong euro
The European Central Bank has an interest in a strong currency, and the euro’s level also reflects broad global interest in the euro, Lorenzo Bini Smaghi of the ECB’s executive council said yesterday. “We have an interest in a strong currency,” Bini Smaghi said, adding that the ECB’s main focus is on assuring price stability in the 13-member currency bloc. The “world is betting on Europe,” he said in this town near Florence at a conference hosted by Italy’s Confindustria business lobby. Bini Smaghi also warned conference attendees against thinking that U.S. authorities are deliberately driving the U.S. dollar down to boost the competitiveness of their exports. “I don’t think so,” he said. “It’s wrong to assume conspiracy.” The ECB’s mandate is to keep medium-term euro-zone inflation rates “close to, but below, 2.0%.” Euro-zone inflation in October rose to a 2.6% annual rate due to a spike in food and oil prices.
“If we keep inflation low, and inflation expectations low, then real interest rates will also be kept low, and that’s what matters to businesses,” Bini Smaghi said.
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